the august jobs report provided some salve to the markets which have been laboring under the fear of an aggressive federal reserve nonfarm payrolls increased by 315000 in august but the job gains from the previous two months were revised lower by 107000 the august results are the slowest monthly pace of job gains since april 2021 the labor market reached a significant milestone in august by recovering all the jobs lost during the covid lockdowns in 2020 the unemployment rate rose to 37 from 35 in july the july jobless rate was the lowest seen since 1969 the good news is that the unemployment rate went up for a good reason the labor force participation rate rose to a twoyear high of 624 after seeing a sevenmonth low in july while the household survey which is used to compute the unemployment rate saw the number of employed rise by 442000 the total number of people interested in working rose more the workweek dropped to 345 hours down from a 21year high of 350 hours in january 2021 marginal workers who left the workforce during the pandemic seem to be finally returning boosting the labor force and lowering the average workweek in addition average hourly earnings held steady at 52 yearoveryear for the third straight month looking at all the pieces of friday’s employment report the labor market data will provide the federal reserve with some solace the pace of job gains is slowing and the labor force has increased which helps lower the pressure on higher wages that can feed persistent inflation the oneyear forward fed funds futures rate is a crucial variable for recession probability and treasury yields expectations for the fed funds rate in one year reached a high reading of 406 in midjune when stocks hit a low and treasury yields made a high expectations for the future fed funds rate dipped after the goldilocks employment report on friday odds of a 75 basis points 075 rate hike at the september 21 meeting declined with a 50 basis increase more likely the next big data point for the fed policymakers will be the august consumer inflation cpi reading on september 13 treasury yields remain the dominant influence on stock movements in the short term with higher yields likely to send the sp 500 lower the 2year treasury yields fell for the week due to the adjusted expectations for the fed based on friday’s job numbers the sp 500 was over 3 lower for the week as the 10year yield moved higher despite declining on friday the shortterm path for stocks is likely choppy as the market struggles with the rising odds of an economic downturn caused by the fed’s rate hikes to fight inflation investors should have an asset allocation to ride through any economic turmoil and focus on quality companies that can survive the looming recession and thrive after it is a lighter week for us data but fed chair powell speaks on thursday powell seems likely to repeat his sentiments from jackson hole without committing to a specific level rate hike at the september meeting the european central bank ecb takes center stage this week with the size of the rate hike the crux of the issue as the eurozone struggles with high inflation and an economy likely on the precipice of recession