Jack Janasiewicz, CFA® Portfolio Manager and Lead Portfolio Strategist Natixis Investment Managers Solutions

“All eyes will be on this Friday’s jobs report here in the US. With the US Federal Reserve consistently highlighting their data dependency as the driving force for navigating future rate increases, the market is acutely in tune with any and all economic releases related to employment and inflation. Most important within the payroll print will be the wage component where any signs of stickiness will lead to further consternation over the need for additional rate increases to cool the labor front.

Recent data ranging from the US Job Openings Survey (JOLTS) to ADP ’s National Employment Report point towards a softening in the labor market. The most recent JOLTS survey showed US job openings falling to the lowest levels in over two years. Another leading indicator within that report – the quits rate – dropped to the lowest level since the start of 2021, implying that Americans are less confident in the ability to find another job in the current environment. Further indications for a softening labor market. The details within the ADP report also point to easing wage pressures as both the Job-Stayers and Job-Changers components within the release hit levels not seen since the summer of 2021.

Recent trends in Payrolls certainly point towards a continued softening in the labor market and ancillary data seems to lean in that same direction. We still view the labor market as continuing to normalize with areas that have been short supply slowly right-sizing and those with excesses seeing downsizing. While this has been happening, wages have been adjusting accordingly albeit at a slower pace than many market participants might like. Regarding the August payroll data, we expect to see continued signs of labor market softening and along with it wage pressures.”