Why did hiring stop?

Kelly Evans's afternoon commentary & top market stories

VIEW IN BROWSER | SUBSCRIBE FRI, SEP 03, 2021 YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC AS OF FRI, SEP 03, 2021 • 12:38 ET DJIA 35341.66 -0.29% -102.16 S&P 500 4531.16 -0.13% -5.79 NASDAQ 15350.76 +0.13% +19.59   EDITOR'S NOTE The most notable thing about this morning's big jobs report miss was the sudden stop in hiring in the leisure and hospitality sectors.    Literally, those sectors had "unchanged," i.e., zero, net jobs added after adding 350,000 per month on average in the six months prior. There are still 1.7 million "missing" jobs if you compare total employment in those sectors to where it was pre-pandemic. (Interestingly, that's only a third of the total job loss of 5.3 million from pre-pandemic levels.)    Here's my point, and the central question: did hiring stop because the delta variant slowed demand, or because wages in those sectors aren't high enough to increase the worker supply?    If the delta variant slowed demand, then we have a macro slowdown story. The kind of economic slowdown that, if it gets bad enough, typically engenders calls for fiscal and/or monetary support (like we saw in 2020). The kind of slowdown that should delay the Fed's tapering, which now seems widely expected.    But wait--if we have a "wages aren't high enough story," that is the opposite of a macro slowdown. That is macro strength! When recessions hit, wages often decline. Workers lose bidding power. No one holds out for higher pay--they take whatever they can get to make sure they can still put food on the table.   And if we have macro strength right now--if in fact, workers have gained bidding power, if we're about to lose Oreos and Ritz crackers because Mondelez workers have gone on strike--that's a totally different story. The Fed should obviously not be cutting rates or buying bonds to ease financial conditions and lower interest rates.    Economist Brian Bethune, for instance, thinks supply constraints--labor, but also parts delays and shortages--are slowing GDP by about two full points right now. I have no idea what kind of "policy response" would address that in the near term. Obviously building out semiconductor factories isn't going to happen in time for Christmas.    Has fiscal policy--stimulus and boosted jobless benefits--actually given workers more bargaining power than they would otherwise have right now? Perhaps, although so far, the expiration of boosted benefits in many states this summer doesn't appear to be a major catalyst in nudging people back into the workforce. Then again, economists say the child tax credits may be offsetting that need somewhat.    I was listening to a podcast with Jeremy Grantham of GMO the other day, and he noted the longstanding stagnation in real U.S. wages. Basically, he thinks we have a lot of room to grow. (Many others agree.) He's also been warning that stocks are overvalued, and obviously a higher profit share going to employee compensation is a risk to corporate profits. For now, companies have been largely able to pass along higher costs in the form of higher end prices--none of which fits the theme of a "macro slowdown" story.   That said, I don't buy that hiring stopped in leisure and hospitality last month because wages weren't high enough. I think it's pretty obvious that delta slowed demand for those services--just look at how airline fares have been falling. This all smacks to me of a temporary demand (i.e. macro) slowdown in a larger macro-strength story. Punting the taper a month or two could make sense from that point of view. But it certainly isn't the whole story.    See you at 1 p.m!   Kelly Kelly Evans Twitter: @KellyCNBC Instagram: @realkellyevans KEY STORIES  Jobs report disappoints — only 235,000 positions added vs. expectations of 720,000 Job creation for August was a huge disappointment, with the economy adding just 235,000 positions against expectations of 720,000. Inflation could repeat the 1960s, when the Fed lost control, Niall Ferguson says Inflation could be repeating the trajectory of the late 1960s, according to economic historian Niall Ferguson. Retiring GOP Sen. Toomey says Trump should not lead ticket in 2024 Sen. Pat Toomey has urged his party not to nominate former President Donald Trump as its presidential nominee in 2024. Apple delays its criticized plan to scan iPhones for child exploitation images Critics said Apple's system was at odds with its promises to protect its customers' privacy. Dr. Gottlieb says Northeast has yet to see 'true delta wave,' expects another Covid case spike "I think our true delta wave is going to start to build after Labor Day here in the Northeast and the northern part of the country," Dr. Scott Gottlieb said. Here's where the jobs are — in one chart The hiring blitz at bars and restaurants came to an abrupt halt in August as Covid-19 cases and a lack of workers kept employers from adding to payrolls. Stocks making the biggest moves midday: Didi Global, Nvidia, PagerDuty and more These are the stocks posting the largest moves in midday trading. Get ready for a possibly record-breaking rush of IPOs this fall The IPO market has already had its busiest year since the internet bubble in 2000, and the fall will likely set a record. Didi jumps 14% this week amid report of Chinese government taking it over State-owned companies based in Beijing would invest in Didi to gain control under the early-stage proposal pending government approval, Bloomberg News reported. Ford Chairman Bill Ford's vision of a greener auto industry is finally on the horizon Bill Ford has served as the environmental conscience of the auto industry. It's something that until recently was taboo in a business reliant on fossil fuels.     IN CASE YOU MISSED IT Shares of ChargePoint surging today, still down off high for the year Xylem aims to use tech to avoid water shortages Labor market still leans in workers' favor   Unsubscribe Manage Newsletters Terms of Service Join the CNBC Panel Digital Products Feedback Privacy Policy   © 2021 CNBC LLC. All rights reserved. A property of NBCUniversal. 900 Sylvan Avenue, Englewood Cliffs, NJ 07632 Data is a real-time snapshot *Data is delayed at least 15 minutes. 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