Good Friday AM,

First Friday of the month (sounds like a reason to have a party) in other circles is also known as jobs day.

This is the day the BLS releases its data on the prior month’s job creation as well as any revisions to the months before. Jobs day is often seen as the most important economic report of the month. To set the stage, on Wednesday, ADP released its payroll number. I don’t like the ADP report. It is not calculated in the same manner as the Government’s report, so it rarely paints the correct and consistent picture and as a result, spooks markets. The ADP report showed on expectations of 189k new jobs, 324k were created. WHAT? This is one of the reasons that mortgage rates took a hit this week (the other being Fitch’s downgrade of the US credit rating). Today’s government data came in far more reasonable to what we know is going on in the economy. 187k new jobs formed. Downward revisions for previous months of 49k. The unemployment rate did tick down by .1 but that is from people leaving the workforce.

The WSJ had some good insight as well.

The U.S. this summer posted its two weakest months of job growth in two-and-a-half years. Nonfarm payrolls rose by 187,000 in July and a revised 185,000 in June, the Labor Department said Friday. By comparison, employers added an average of 399,000 jobs a month in 2022 and 287,000 a month through the first five months of this year. The slowdown in hiring likely reflects a cooling economy, a welcome development for Federal Reserve officials trying to get inflation down. But other metrics suggest that there is still plenty of demand for workers. Private-sector pay in July rose 4.4% from a year earlier, still well above prepandemic levels. The unemployment rate ticked lower and has been hovering near a half-century low. And the share of so-called prime-age workers (25 to 54 years old) with a job held steady at the highest level in more than two decades. The labor market appears to be coming into balance, but perhaps it isn’t all the way there yet.

And on the US Credit Rating Downgrade…

Fitch Ratings’ surprise move to strip US government debt of its top-tier rating this week sparked passionate criticism from Washington and Wall Street alike, with Treasury Secretary Janet Yellen deriding the downgrade as “arbitrary.” But to David Beers, former head of S&P Global Ratings’ sovereign debt scoring committee and one of the analysts behind the controversial ratings cut in 2011, it’s an important reminder that the US isn’t entitled to the top grade.

“The underlying fiscal position and underlying debt trajectory has picked up pace,” Beers, who is now a senior fellow at the Center For Financial Stability, told Romaine Bostick and I on Bloomberg Television. “AAA is the top rating any rating agency can assign, but of course, the US and any other sovereign that’s being rated has no god-given or automatic right to that.”

Fitch’s move comes nearly 12 years to the day since S&P shocked markets by dropping the US one level to AA+ from AAA for the first time in history, a move helmed by Beers and John Chambers. Their reasoning more than a decade ago sounded startlingly similar to Fitch’s logic this week: ballooning US deficits and political dysfunction. Though May’s debt-ceiling drama ended with an as-expected last-minute deal, repeated debt-limit clashes and eleventh-hour resolutions have eroded confidence in the nation’s fiscal management.

For Beers, it’s a bit of a victory lap. S&P has yet to reverse the downgrade, and many of the issues flagged by the rating firm back in 2011 have only escalated since. If anything, other agencies have been a bit meek, he said.

“It’s fair to say that the rating agencies, based on their own criteria, have been pretty timid in their actions,” he said. “If anything, Fitch’s action is simply confirming what S&P decided back in 2011, and here we are in 2023.”

Please remain safe and stay healthy, enjoy the weekend and first, make today great!!!