The BLS jobs report for August cheered the markets, even though it was negative overall; the euphoria (relief?) stems from the fact that it wasn’t as bad as feared. Nonfarm payrolls fell 54k, about half the forecast decline of 105k, and July’s originally reported loss of 131k jobs was pared, also to 54k. But – nonfarm payrolls declined in both months. Private payrolls grew by 67k, some 27k more than forecast, and July’s 71k gain was revised up to 107k. But – the pace of private payroll growth is slowing, and has reached the anemic point. The jobless rate is now 9.6%, the same as forecast. But – it’s up a tick from July. Average hourly earnings rose 0.3%, two ticks more than expected and a tick more than in July, and the YOY pace of +1.7% was a tick better than forecast. But – the current YOY pace is a tick below July’s, and the lowest in the data’s history. The market is desperately clinging to its desire to avoid free-fall, and thus is ignoring the "buts."

Factory payrolls did disappoint, declining for the first time since December. The 27k drop for August all but wiped out the 34k manufacturing jobs gained in July. The forecast was +10k. The average workweek held steady at 34.2 hours, as expected. Overall, nonfarm payrolls have shed in the last three months more than a quarter of the jobs gained in the first five months of this year.

The ISM’s service sector gauge fell to an eight-month low in August, dropping nearly three points to 51.5. The forecast was 53.2. Business activity was the lowest since January; new orders, the lowest since December; and employment, also the lowest since January. Prices paid rose to the highest level since May.

The markets backed off strong early gains following the ISM release, but are still in rally mode. The tone early this month seems to be "regardless the data, we are not going to have a bad September." That’s been good for yields thus far, and today is no different, with the two-year up a couple of basis points to .51% and the ten-year up 7 bp to yield 2.69%.

Note: the bond market will be closed Monday in observance of the Labor Day holiday.  There is no early close today.  We wish everyone a safe and enjoyable holiday weekend.