In this current (unique) cycle, the labor market is perhaps the best one to capture the good news is bad news mantra that has developed since the Federal Reserve (Fed) embarked on its rate-hiking cycle. From the perspective of policymakers, weaker labor data (bad news for workers) is a welcome development, as that would theoretically produce some slack, lead to less-hot wage growth, and ultimately help bring demand back into balance with supply. As such, persistently strong labor data (be it faster wage growth and/or stronger demand for labor, both of which are good for workers) is seen as bad news in the eyes of investors, as that would all but guarantee the Fed must keep pressing harder on the brakes.
Goldilocks jobs report, or less than meets the eye?
The August jobs report, released last Friday, was billed as somewhat-Goldilocks (not too hot, not too cold). Nonfarm payrolls increased by 315k, as shown via the blue bars in the chart below, which was slightly higher than consensus expectations. However, there were downward revisions to the prior two months totaling 107k, the bulk of which was for June's data.
For what it's worth, it's decidedly uncommon to get large downward revisions during periods of strong job growth. The revision lower between the second and third "prints" for June was the largest since March 2020—which in turn was the largest since the start of the financial crisis in September 2008. Given downward revisions, the six-month average gain in payrolls has dropped from nearly 600k earlier in the year to 381k as of August. The household survey, from which the unemployment rate is calculated, showed a stronger gain of 442k jobs, as shown via the orange bars in the chart below.
"Competing" employment surveys
Source: Charles Schwab, Bloomberg, Bureau of Labor Statistics, as of 8/31/2022.