TQ Morning Briefing
Fewer service firms cut staff in August than in July. The hiring line contracted anyway. Payrolls land at half past eight into a survey that has already answered the question.
Thursday was the strongest session in weeks for the Dow and the S&P 500. Software led it.
The move started at the front of the Treasury curve. The two year Treasury yield fell hardest, and the thirty year Treasury yield barely moved.
That is a repricing of the next meeting.
The dollar did the rest. It fell for a third straight day and the yen surged with it.
This morning it has turned firmer against the yen and the franc. Futures are mixed, with the Nasdaq up and the Dow a shade lower. The ten year Treasury yield has come down again.
lululemon (LULU) cut its outlook and fell hard after the close. Software reported all night, and the market took it name by name.
Market Implication
Nobody is paying for protection into the number the week was pointed at. The VIX is going in lower, and a dollar three days weaker has already started back. This is a market that expects the print to settle something.
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The survey answered it a day early
The services survey landed Thursday, a day before the payroll report everyone is waiting for. Most coverage stopped at the headline.
Underneath it, new orders jumped the most of any line. Business activity sits higher still.
The hiring line went the other way. It stayed under water for a second straight month, and in thirteen of the last eighteen.
Here is what changes this morning. Fewer firms cut staff in August than in July.
So layoffs eased and the index barely moved. The firms that stopped cutting did not start hiring. The seats are open and nobody fills them.
One respondent wrote it down. "We have lost employees due to normal attrition and are having issues backfilling these positions with qualified candidates."
Price is doing the work instead
A firm with orders it cannot staff has one lever left.
The prices line came in above seventy for the fifth time in six months. Service prices have risen for more than a hundred straight months.
Demand arrives. The seat stays empty. The invoice goes up.
Structural Setup
Services demand accelerated last month, and services is where most American jobs sit. Price is covering the missing headcount, so services inflation tracks order books instead of wages. The long end of the Treasury curve has stopped reacting. All of it lands on the September meeting.
Last night the tape refused to price software as one thing.
UiPath (PATH) beat on revenue and swung to an operating profit. The stock jumped, then gave it all back before eight. Its growth runs in the low teens, and the market is asking whether AI eats back office automation instead of feeding it.
Zscaler (ZS) put up a record operating margin and barely moved. Security comes out of a different budget.
Then lululemon, which fell furthest. Comparable sales dropped everywhere, hardest at home, and the company cut its outlook. A large customs refund sat inside that quarter and still could not hold the guide up.
Sector Read
Growth rates did the sorting, and the fastest sell where the work cannot be deferred. Watch next month's services survey, the hiring line against the new orders line. If hiring stays under water while orders hold, that spread matters more to these names than any software cycle.
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Wages are the part of the labor story nobody has priced.
Revised second quarter unit labor costs came in tamer than the first estimate, and productivity held. Employers were not paying up.
That sits oddly beside a survey full of firms who cannot fill a job. Companies short of staff normally bid for them.
Two things could explain that. Either the seats can wait, or the work is going somewhere other than a hire.
Average hourly earnings, inside the release the market is sitting flat into, is the first read.
Waller moved the market Thursday by saying he would hold if inflation keeps improving. The number he named was next week's August CPI, not this morning's payroll count. He goes quiet Saturday.
Watch Signal
Hourly earnings is the third line most desks read and the first that matters. Accelerating pay with a low payroll count means a tight labor market rather than a soft one. Flat pay means the seats can wait, and the hawkish case goes quiet until the next inflation report.
What a company buys when it cannot hire
A dispatcher quits in July. Two months on, the replacement is still not hired. The trucks go out anyway.
So the firm buys a way to run the same fleet with fewer people. That is a labor decision wearing a software invoice.
Samsara (IOT) reported after the close with the cleanest version yet. Revenue grew by close to a third, recurring revenue matched it, and the market paid up.
The customer list is the tell. Accounts paying six figures a year rose by about a third, and each spent more.
Samsara's own margin widened by several points too.
These are not technology companies. They are trucking fleets, utilities, construction firms and city governments.
Every one sits inside the services survey. They are the employers it says cannot fill a seat.
The Read
The labor bid is real where the missing worker stood on a site and the job could not wait. It is thin where the work was already a keystroke, and back office automation got sold last night on the tape that paid for this. Price is where the difference shows first, long before the order book.
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Economic Data: August employment situation, 8:30am ET. Nonfarm payrolls, the unemployment rate, average hourly earnings, the participation rate and average weekly hours all arrive in that one release. Baker Hughes rig count, 1:00pm ET.
Fed Speakers: None scheduled. The FOMC blackout period begins Saturday, September 5, ahead of the September 15-16 meeting.
Earnings: Nothing of size. The US slate empties after Thursday night's wave, and the market is closed Monday for Labor Day.
Overnight: Nikkei 225 +1.26%, Shanghai Composite -0.30%, FTSE 100 -0.04%, DAX +0.29%
Two numbers print in the same minute this morning. Only one will lead the coverage.
The payroll count tells you how many jobs got added. The unemployment rate tells you what happened to the people looking.
A low count with a steady rate means firms wanted workers and could not find them. That argues for tighter policy rather than looser.
A low count with a rising rate means the demand went away. Then August was the peak and the order book rolls.
The count leads every screen at half past eight. The rate is the line that settles it.