Labor Market is Not a Source of Inflation Pressure, Oxford Economics Says — Market Talk

1003 ET - When inflation runs hotter and the job market is tight--meaning there are more jobs than available workers--employees usually want higher wages to compensate for high living costs. It's one of the reasons the Fed makes sure inflation expectations remain well anchored. In Friday's jobs report, average hourly earnings rose 0.3% month-over-month, while year-over-year earnings growth slowed to 3.1% from 3.2%. "The Fed can be reassured that the labor market is not a source of inflationary pressure," says a note from Oxford Economics. ([email protected])1000 ET - The recent rise in global bond yields poses a threat to companies' financial well-being, especially those with high levels of debt, RBC BlueBay Asset Management's Mark Dowding says in a note. Credit spreads have stayed fairly tight in recent months, failing to price in the risk from geopolitical conflicts and rising debt issuance, Dowding says. "We are witnessing pockets of overvaluation [in credit] at a time of increased leverage and greed for returns," he says. If companies continue to raise their debt supply, they risk facing deterioration in their financial positions, which could hurt corporate bonds' performance, he says. ([email protected])0939 ET - Canada's employment drop in August could reflect a "normalization" in data after three strong months of hiring, says Royce Mendes, head of macro strategy at Desjardins Capital Markets. In the May-to-July period, Canada added 181,100 jobs, or an average of over 60,000 per month. Mendes says it's possible some of the weakness may reflect the later-than-usual Labor Day weekend, "which could have pushed some of the typical end-of-summer hiring into September." ([email protected]; @paulvieira)0934 ET - The Bank of Canada's somewhat surprising hawkish turn this week might now look "somewhat premature" due to details in August's labor data, says Thomas Ryan of Capital Economics. Employment fell 41,700 in August although the unemployment rate remained unchanged at 6.4%. More notably, wage growth slowed sharply, to 2% from a year ago — or weakest 12-month increase in pay since 2021, or during the Covid-19 pandemic. "It is hard to question our and the BOC's assessment that the economy remains in excess supply," Ryan says of the wage-growth slowdown. August's labor data should temper talk of an immediate rate hike, he adds. ([email protected]; @paulvieira)0929 ET - The August jobs report showed much stronger hiring than expected, at 162,000 with the unemployment rate steady at 4.1%. The data lifted long and short term rates and the U.S. dollar index. Meanwhile, riskier assets like bitcoin, which had a positive week up until now, are taking a hit. Bitcoin is back down below the $80,000 mark, trading off 2.4% to $79,531. Nevertheless, in its jump to $80k last month, bitcoin appears to have reignited a bull market, says analysts with CryptoQuant. "Exchange activity accelerated…. with derivatives positioning, whale inflows and spot-market deposits all increasing as market participation broadened," says the firm. ([email protected])0925 ET - Canada shed nearly 42,000 jobs in August, or a partial reversal from the 75,000 employment gain in the prior month. CIBC Capital Markets says that, on a 3-, 6- and 12-month average, job growth is hovering around 20,000 a month, or above the pace of population growth. "That is consistent with the gradual improvement in the unemployment rate that we have seen," says CIBC economist Andrew Grantham. Still, the August drop coincides with other indicators pointing to a weak beginning to 3Q and an escalation in the U.S.-Canada trade conflict. Grantham says this provides confidence that the Bank of Canada will keep its policy rate on hold through 2026 even though BOC worries over inflation have intensified. ([email protected], @paulvieira)0920 ET - It has been a much better job market for Canadian students. The unemployment rate for students returning to school stood at 15.6% in August, down 1.3 percentage points from 12 months earlier. On average from May to August, the jobless rate for returning students was 15.9% against 17.9% during the same period in 2025. The fall in the unemployment rate was most pronounced for older students, with the rate for those aged 20 to 24 at 9.2% against 12.3% last summer. Still, overall employment for youth in Canada fell by 19,000, or 0.7%, in August, and the unemployment rate for those 15 to 24 edged up 0.3 percentage point to 12.9% after a net decline of 1.7 points from April to July. ([email protected]; @RobbMStewart)0918 ET - Hot August U.S. employment numbers, coupled with upward revisions for July, "means that if the inflation picture dictates a rate hike, the Fed will be comfortable that the labor market is strong enough to withstand it," AllianceBernstein's Eric Winograd says in a note. The numbers show that "labor market remains on solid footing." Winograd adds, however, that he sees "no obvious evidence that the economy is overheating." Odds of an interest rate increase are 50-50 after the jobs report, he says. ([email protected])0914 ET - In a labor market with low hiring and low firing, it's hard for some Americans to get back into the market once they're locked out. In the household survey from Friday's jobs report, 27% of unemployed people have been jobless for 27 weeks or more. This figure has largely hovered around that range for about a year.([email protected])0904 ET - The information industry has the bleakest showing in an otherwise upbeat jobs report for August. Employment in the industry declined by 23,000 jobs that month, a big drop off from the 8,000-job decline it was averaging over the prior 12 months, according to the Labor Department. Computing infrastructure providers, data processing, web hosting and related services saw 8,000 job decline by themselves in August. Publishing industries took a 7,000-job hit and broadcasting and content providers bled 5,000 positions. Other sectors saw big gains were little changed. Restaurants and bars were among the biggest gainers, picking up 59,000 new jobs in August, well above their average monthly gain of 12,000 in the past year. ([email protected])0852 ET - Gold futures fall following a U.S. employment report showing a much bigger-than-expected 162,000 increase in August payrolls and upward revisions to the previous two months. An easing in Treasury yields and weaker dollar had helped lift gold the previous two sessions as investors awaited the closely watched jobs numbers. Yields are up and the dollar is stronger following the report. Gold for December delivery is down 2.4% in New York at $4,429.50 a troy ounce. Silver falls 2.7% to $65.875 a troy ounce. ([email protected])0851 ET - Treasury yields and the dollar jump as job creation in the U.S. jumps to 162,000 in August, beating WSJ consensus of 53,000. July's previously reported 23,000 job destruction is revised to 21,000 jobs created. Unemployment was unchanged at 4.1%. The data adds to expectations that the Fed could raise rates this month, although inflation gauges next week will also be influential. Yields had been dropping before the data and sharply reversed course. The 30-year yield is at 5.258%, the 10-year at 4.802% and the two-year at 4.412%. The WSJ Dollar Index moves from flat to up 0.2%. ([email protected]; @ptrevisani)