an employment application form is displayed during a restaurant job career fair organized by the industry group high road restaurants in new york city us may 13 2021 reutersbrendan mcdermid new york aug 5 reuters  us job growth surged much more than expected in july and the unemployment rate ticked lower giving the federal reserve enough cushion to stay on its aggressive rate hike path as it tries to tame inflation nonfarm payrolls increased by 528000 the labor departments employment report showed on friday june was revised upward to show payrolls rising by 398000 instead of the previously reported 372000 economists polled by reuters had forecast 250000 jobs added last month employers continued to raise wages at a steady pace last month average hourly earnings increased 05 in july after gaining 04 in june that increased the yearonyear increase to 52 from 51 in june read more stocks sp emini futures dropped sharply last down 10 bonds the yield on 10year treasury notes shot higher and was up 112 basis points to 2788 the twoyear us treasury yield was up 166 basis points at 3203 forex the dollar index jumped and was last up 0946 at 106680 inflation is likely to remain sticky for longer with that many more people working theres that much more money thats going to be earned to chase after these goods to drive the inflation… but elevated inflation readings will likely remain with us for longer than anticipated we can now hear fed chair powells voice echoing in our heads saying that the stronger than expected jobs report implies that the economy can indeed withstand higher rates we were approaching the 50 retracement level on the sp 500 which is important because no bear market since world war ii ever reached the level only to then establish an even lower low we came close but did not hit that level augusts markets personality will come through once again as being the third highest month in terms of volatility and that sets up the market for a very cautious september as well while next weeks numbers will imply that the peak is in in terms of inflation because were looking for an 88 year on year rise versus the prior reading of 91 initially one could look at that as positive news but now investors might say it could simply be a dip before an even higher reading down the road the unexpected acceleration in nonfarm payroll growth in july together with the further decline in the unemployment rate and the renewed pickup in wage pressure make a mockery of claims that the economy is on the brink of recession this raises the odds of another 75 basis point rate hike in september although the outcome depends more on the evolution of the next couple of cpi reports anyone that was inclined to jump onboard the pivot train is likely to jump off at the next station this is not indicative of a fed that will need to shift gears next year and start cutting rates the pivot narrative has been put to bed but this doesnt preclude the fed from downshifting to 50 bps in sept” this is good news market may have a negative reaction in a kneejerk fashion but we want people working and the labor participation rate to go higher there are two ways of stay out of recession and one of those is for jobs to continue to grow and consumers to continue to spend as it pertains to the labor force its never felt like we were going into a recession you could certainly see a recession sometime in 2023 but its certainly not knocking on the door right now not with these many jobs being created on a monthly basis last months number was revised higher as well its a strong report and the rumors of a recession have certainly been exaggerated there is some time between the next fed meeting anyone that extrapolates what the fed is going to do based one data point between now and september is getting ahead of themselves the headline number is really impressive but maybe that’s more style over substance the number of multiple jobholders shot up more 559000 is some of the employment strength superficial and just because people are trying to work more in order to make ends meet payrolls were nearly double the amount we were looking for theres nothing to suggest this report this weak at all unemployment actually went down to 35 this is very hot employment data it means the fed is going to continue to raise interest rates bonds are getting crushed stocks are coming down the bottom line is this gives the upper hand to the fed which says were not in a recession yet and the fed will probably tighten if we get one more number like this in august the fed could hike by 75 basis points in september rather than 50 basis points im surprised in the strength in wage growth i was looking for a cooling off thats the key to the report thats why we’re seeing a sell off in the bond market and it proves that inflation is still a big problem what weve heard from the various fed governors this week about it being too early to pivot away from a tightening policy is definitely in place with the jobs report that is this hot when you look back at the period from 2015 to 2019 the average jobless jobs gain was 190000 and the unemployment rate was north of 4 were well below that as far as the unemployment rate and certainly weve been averaging 200000 to 300000 new jobs going forward so the job market continues to be much hotter than historically normal times so it gives the fed reason to continue to raise rates and that is whats got the market on edge the numbers not a surprise there were some hints at it from some of the fed governors the inflation numbers next week will complete that picture the inflation rate will come down my guess is we get down to maybe 5 or 6 by the end of the year but the hard part is going to be getting from that 5 6 to 2 thats going to require a more aggressive fed so the fed is still on target to raise rates 75 basis points makes sense in light of the data and they will continue at each of their meetings through the end of the year