The August jobs report showed 162,000 new jobs, nearly triple what economists expected. The private payroll surveys from ADP and Revelio showed a fraction of that. This week we walk through the numbers: the manufacturing surveys, the housing data, the labor market details behind the headline, and what Chair Warsh and Governor Waller each said about rates ahead of the September 16 meeting. The data are below. Read them and see where things stand.
US Economy
The Dallas Fed manufacturing survey showed output growth accelerated. The new orders index surged. Employment slipped but remained in expansion. Furthermore, future expectations jumped. Perceptions of broader business conditions improved.
Input price pressures rose.
Most manufacturing industries still have room to expand production, though electrical equipment and machinery manufacturers tied to the AI infrastructure buildout are nearing capacity constraints.
September has historically been the weakest month for retail demand, with both retail net notional and directional skew at their lowest levels of the year.
The ISM manufacturing PMI softened more than expected but continued to signal a solid expansion in factory activity. All subindices were in expansionary territory. Output is broadly stable and near the highest level in over four years. New orders moderated. Employment expanded at a slower pace.
The S&P Global US Manufacturing PMI was revised upward. While the headline indicates solid expansion, underlying output and new order growth slowed, with activity heavily supported by preemptive inventory accumulation against Middle East supply disruptions and tariffs.
On its face, the BLS labor report today was quite solid. There are a few minor caveats that should be noted, but overall this was the best report we’ve seen in some time.
Quoting from Barry Habib at MBS Highway (source Morning Update) from his morning update:
“The Bureau of Labor Statistics (BLS) released its August jobs report, showing 162,000 jobs were created, well above estimates of 58,000. Adding to the strong report were positive revisions to the previous two months totaling 55,000. Notably, July was revised from a negative -23,000 to a positive +21,000, accounting for most of the revision.
“While today’s BLS report was strong across the board, it does not jive with the other labor market reports from ADP and Revelio. BLS includes government, so in order to compare apples to apples, we have to look at the BLS private payroll figure, which was +127,000. That compares with +38,000 in ADP and +37,000 in Revelio – clearly some big disparities.
“Additionally, the BLS said there were 74,000 jobs created from the birth/death model, which tries to capture small business job growth that compares with zero job growth in small businesses in ADP.”
While most of the press and markets focus on the establishment survey, there were things in the household survey that were outstanding. From my friend Steve Moore:
“But the big number that jumps off the page is the return of the American worker. After many months of troubling declines in the workforce (one million missing workers) from the peak last year, in August we saw a complete reversal. According to the household survey, 683,000 more workers entered the workforce and 569,000 of them found jobs and started earning a paycheck. The labor force participation rate rose. Data center construction is one of the major drivers of new employment.”
August employment: household survey versus nonfarm payrolls. Source: Bureau of Labor Statistics
This is a most welcome outcome. And with unemployment at only 4.1%, that bodes well. At some point we will get some serious analysis of how the large influx of illegal immigrants messed with the jobs numbers and now with both government and self-deportations, the number of workers in the US is dropping and it’s clearly, at least for this past month, finally showing up in the participation rate. That participation rate has been making a lot of us very concerned.
This chart shows the changes in job openings by industry.
Changes in job openings by industry. Source: The Daily Shot
The jobs-workers gap, which measures the difference between labor supply and labor demand, turned positive. The hiring rate fell. Layoffs and quits also declined. The low quits rate suggests workers remain reluctant to change jobs, pointing to easing pressure on wage growth. Alternative, high-frequency data from private-sector sources have declined by 4%–5% since February, painting a picture of a weaker labor market than the official data suggest.
Home price appreciation slowed to 1.3% year over year in July, or −2.0% in real terms, as high prices, elevated interest rates, and affordability constraints drive a particularly sharp correction across southern and western metros. Single-family home inventory was 2.2% above year-ago levels, but remained 8.3% below 2019 levels.
Home price appreciation through July 2026. Source: AEI Housing Center via The Daily Shot
Source: AEI Housing Center
The Atlanta Fed’s GDPNow model is now tracking Q3 GDP at 4.8%, up from 4.6% on August 26.
ADP private payrolls growth slowed, adding 38,000 jobs in August and trailing expectations. Gains were driven entirely by service sectors—led by education and health services—while goods-producing industries shed workers.
Factory orders rose more than expected. Excluding transportation, orders still improved by a robust 0.6% month over month. In level terms, factory orders excluding transportation have been strong. The ISM Services PMI accelerated more than expected, signaling a solid expansion in the sector. The expansion remained broad-based. The new orders component posted the strongest reading since early 2023, signaling a robust demand pipeline. The Backlog of Orders Index reversed higher, indicating that business demand is outpacing capacity and adding to price pressures. A weighted composite of ISM manufacturing and services PMIs points to Q3 GDP growth above 2%.
The 30-year mortgage rate rose to 6.71%, its highest since July 2025, as elevated Treasury yields further weakened affordability.
US Stock Market
September is historically the toughest month for equities, with positive returns just 49% of the time. Historically, September’s worst S&P 500 declines have overwhelmingly occurred during already-weak markets. Strong year-to-date gains have historically preceded many of the best September returns, suggesting the S&P 500’s nearly 13% advance in 2026 may reduce the risk of a sharp September selloff. The percentage of global equity markets trading below 50-day moving averages has jumped.
Analysts continue to raise EPS forecasts for the rest of 2026. Growth in forward EPS has been accelerating.
The Fed
Fed Chair Kevin Warsh’s Jackson Hole debut speech was hawkish…. BUT A large language model did not grade Chair Warsh’s Jackson Hole speech as being particularly hawkish.
Key passages from Chair Warsh’s Jackson Hole remarks. Source: Federal Reserve
Source: Federal Reserve Read full article
Warsh commented that he gauged underlying inflation by looking at the shares of the PCE basket that showed price increases above 3%. He noted these measures are below the post-pandemic highs but well above levels in the two decades preceding the pandemic.
Share of PCE basket with inflation above 3%, year-over-year and 6-month annualized. Source: The Daily Shot
Fed Governor Waller signaled support for holding rates steady if forthcoming data confirm disinflation.
Waller signals support for holding rates if disinflation continues. Source: CNBC
Source: CNBC Read full article
Treasuries rallied, led by the front end, as the market dialed back rate-hike expectations.
Great Quotes
“The happiness of your life depends on the quality of your thoughts.” — Marcus Aurelius
Picture of the Week
Jaguar
Jaguar in the Brazilian jungle
All content is the opinion of Brian Decker
