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Despite August’s weak jobs report, equity markets rallied on expectations that looser monetary policy, fiscal stimulus, and steady corporate earnings will sustain economic growth.

What Caught Our Eyes This Week

Still No Jobs (but Stocks Don’t Mind)

The U.S. economy added just 22,000 new jobs in August, following along with the post-Liberation Day trend of hiring hesitancy. In fact, outside of health care (which has its own structural tailwinds thanks to an aging population), job creation has been negative for three of the last four months. And still, the unemployment rate hasn’t moved much, most recently inching up to 4.3% (still historically low). There are supply-side issues in play here, with baby boomers starting to age out of the workforce and immigration no longer filling that gap. So, while there aren’t many jobs available, there also aren’t many people looking for one, hence a stable unemployment rate.

Equity markets took the report as a sign that rate cuts are imminent, with rate-sensitive and cyclical pockets like small caps, homebuilders, and real estate rallying in response to the weak data. This has been a somewhat counterintuitive trend in stocks lately: even as labor markets stagnate and consumption slows-equity markets have been adopting cyclical undertones. Why? Fiscal stimulus from the One Big Beautiful Bill is set to kick in over the next few quarters. Corporate profit growth is still generally positive, as is broader economic growth. Add looser monetary policy to the mix, and forward-looking equity investors are betting that the soft patch we’ve been moving through won’t mark the end of the economic expansion. Corporate credit spreads seem to agree.

Nonfarm Payrolls (Monthly Change, Thousands)

CHART OF THE WEEK: Source: Cerity Partners, FRED, 09/05/2025 (Figures are seasonally adjusted)

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