August jobs data: There's 'no smoking gun' for Fed

The August jobs report came in weaker than expected, adding 142,000 jobs versus the 165,000 economists had anticipated. Wells Fargo Investment Institute Global Market Strategist Gary Schlossberg joins Morning Brief to discuss his economic outlook following this report.

Schlossberg notes that currently there is "no smoking gun" to determine the size of the Federal Reserve's rate cut based on this jobs report, although he believes "we're still on track for a soft landing." However, he emphasizes that more data is needed and he wouldn't "rule out a recession at this point."

"For now at least there are clear indications that the market is softening around the edges. Job openings have been declining... The underemployment numbers seem to reflect a reluctance to outright lay workers off. So all this to us points to a shallow employment cycle as we go through what we think will be a soft landing," Schlossberg told Yahoo Finance.

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This post was written by Angel Smith

Video transcript

Stocks are mixed this morning.

After that week, a week's worth of data that sent markets see sign all culminating with today's jobs report.

So well.

Markets in September mirror, what we saw back in August, a burst of volatility and settling to the end of the month or could we be in for more choppy activity ahead?

We post this question to our strategists throughout the week that they had to say.

I think we will see continued volatility during the month of September.

I do think we're in for a period of more volatility.

That's what the seasonality suggests.

The worst month for the S and P 500.

I watched the vics closely.

You don't see spikes like that uh without aftershocks.

And that's what we're seeing now.

I think we get back and test the August lows in tech.

So I think you can have another 5 6% pullback in the NASDAQ 100 here with more on this.

We got Gary Schlossberg.

He is a global market strategist at Wells Fargo.

It's great to have you on here.

So talk to me about the market reaction here.

It seems like Wall Street is mixed on a 25 or 50 basis point cut.

They didn't get the confirmation that they were necessarily looking for.

What is your take, no smoking gun.

There were some soft spots in the report.

But overall, I would agree that in the aggregate, when you look at some of the uh stronger parts to the employment report, we're still on track for a soft landing for a mild, moderate economic slowdown.

We still have data ahead.

The economy clearly is winding down.

I wouldn't rule out a recession at this point, but we have to see more evidence of that.

And I don't think the August employment report really provided that a and, and why is that Gary?

Well, we did have the downward revisions to employment.

That was a focus clearly, uh job growth is winding down.

Uh but uh the Workweek leading indicators of employment temp work or employment continued to decline.

The declines moderated materially, the average workweek was up, overtime hours and manufacturing were up.

Uh The net of it all is that a did hours, the total number of hours worked by uh in the labor market did actually increase on the month.

Not a spectacular report but still consistent with the steady winding down in economic growth and not falling into a recession.

At least, not yet.

The under employment rate is something that I love to look at you say it tells us the degree to which folks are able to get the type of work that they're looking for the number of hours that they're looking for.

For example, it is starting to take up.

It came in just about a basis point above the prior month.

Here.

Is that something that is indicative of companies continuing to kind of pair back before they move on to something more drastic like is off?

Yeah, I think there is a reluctance to lay workers off.

We still have the after effects of that post COVID period.

Labor shortages difficulty in finding workers.

We think that will temper the slowing in the job market for now.

At least the there's clear, there are clear indications that market is softening around the edges.

Job openings have been declining.

As you pointed out, the underemployment numbers seem to reflect a reluctance to outright lay workers off.

So all this to us points to a shallow employment cycle as we go through what we think will be a soft landing.