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A Goldilocks Job Report — Now What?

Posted September 02, 2022

Zach Scheidt

By Zach Scheidt

A Goldilocks Job Report — Now What?

Today's jobs report was juuuussst right for investors. Not too hot, but not too cold.

So what does the report mean for your retirement?

Today, we're going to break down the numbers from the crucial August jobs report. 

I'll explain what it means for you and how to position your investments heading into the end of the year.

Let's dig in!

More Jobs and More Workers

Earlier in the summer, the Fed made it clear that energy prices were the primary driver of inflation.

High gasoline costs made it more expensive for consumers to commute to and from work. And high diesel prices raised shipping costs, which bleed into just about everything we buy.

As energy prices backed off a bit, investors believed the Fed would pivot to being a bit less aggressive with interest rate hikes.

But instead, the Fed pivoted the focal point for inflation.

In Jerome Powell's speech at Jackson Hole, Wyoming, he made it clear that employment was now the inflation driver the Fed would focus on.

That sent the market into a tailspin leading up to this morning's jobs report. Here are the details:

The U.S. economy added 315,000 jobs in August, which is in line with what economists expected.

Wages were up slightly 0.3% for the month, which came in below expectations.

Perhaps most importantly, the labor force participation rate (or the percent of Americans actually working or looking for work) hit its post-pandemic high.

In other words, more workers are entering the job market. And that should make a big difference for the Fed!

A New Perspective on Inflation

Jerome Powell is probably breathing a sigh of relief right now.

That's because more workers entering the job market can help keep a lid on inflation. It could even help inflation to pull back closer to the Fed's target of 2%.

Of course, this is just one report. And there are still plenty of cross-currents to watch carefully.

But if more Americans are looking for work, businesses won't have to compete quite as hard to find qualified employees.

That means businesses won't have to keep raising wages higher and higher — a trend that is naturally driving inflation sharply higher as well.

After a sharp pullback over the last couple of weeks, stocks reacted positively to the job market report. 

Investors see this report as a sign that inflation may be coming under control, allowing the Fed to raise interest rates a bit less.

But you need to remember that we're still in a bear market, which means you still need to focus on protecting your capital.

We do that by investing in companies that generate profits in good times and bad... By paying reasonable prices for the stocks we buy... And by reinvesting dividends, helping us pick up more shares at cheaper prices).

As we head into the Labor Day weekend, I'm encouraged by this report. But I'm still being very cautious with my family's investments.

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