Jobs Revisions Are Pointing to Labor Weakness, Says BlackRock’s Rosenberg

Summary

BlackRock portfolio manager Jeffrey Rosenberg analyzes the July US jobs report, noting that weak headline payrolls and downward revisions signal labor market weakness, while the unemployment-rate drop was supply-led. He explains how disappointing wage growth helps the inflation picture and why the market repricing of a September rate hike, along with the front-end rates rally, makes sense.

• July US jobs report headline payrolls and revisions pointed to labor market weakness
• The drop in unemployment rate was driven by lower participation, not strong demand
• Wage growth disappointed, which is positive for easing services inflation
• Market sharply cut the probability of a September Fed rate hike from >50% to <40%
• Front-end US rates rallied in response to the repricing of Fed expectations
• Rosenberg believes the repricing and front-end rally are justified
• The discussion focuses on the Fed outlook and the importance of the labor report for rate expectations