The August Jobs Report Is the Last Piece of a Puzzle Nobody Wants to Solve

Here is the uncomfortable thing about today’s jobs number: the S&P 500 sits at 7,747, the VIX is at 14.24, and credit spreads are near their tightest readings in history. Markets are pricing calm. But core inflation is running hotter than roughly nine of every ten months on record, and the 10-year Treasury yield is at 4.79% with the Fed parked at 3.5% to 3.75%. Those two things cannot both be right forever.

What moved. Equities rallied Thursday, with the S&P 500 gaining 1.06% to 7,747, the Nasdaq up 1.40%, and the Dow adding 624 points. Gold touched $4,515, the dollar edged to 99.12, and oil settled at $90.93, off slightly from recent highs driven by the Iran-Kuwait flare-up. The 10-year yield holds at 4.79%, a spread of 43 basis points over the 2-year, with breakeven inflation at 2.35%. Long-term rates remain in the upper quarter of their historical range.

On deck today. The August jobs report lands this morning. With CNBC calling this a “jobless summer,” the number will tell us whether slow hiring is a blip or a trend, and whether wage growth is keeping pace with that still-hot inflation.

Why it matters. Real wage growth (wages minus inflation) determines whether consumer spending stays durable or starts to crack. If hiring slowed and wages softened, the real purchasing power story gets harder to tell with a straight face.

Sunday’s Long View goes deeper on where the rate cycle goes from here. It is free, and it is the read worth making time for this weekend.

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