The consensus expectation was that the August jobs report would show that the economy added 720,000 jobs, continuing momentum from last month's strong report. However, the report fell short of these lofty figures only delivering a gain of 235,000 jobs.

Stocks were mostly unchanged, although the more growth-sensitive Russell 2000 (IWM  ) was -0.5% lower. On the margins, it's likely that this miss could push the Federal Reserve's taper to the start of next year. At Chair Jerome Powell's last public appearance at Jackson Hole, he seemed confident that the economy would be unaffected by the delta variant due to the availability and application of vaccines. Clearly, that notion has been brought into question by this month's report.

Inside the Numbers

Although the top-line figure missed badly, the unemployment rate did fall further to 5.2% from 5.4%. This was the worst jobs number since January, leading to concerns that the recent increase in cases could threaten the recovery. Additionally, the slowdown in hiring was felt across the board even in industries that have been strong like education, restaurants, and leisure.

Leisure and hospitality added no jobs, while retail lost 29,000 jobs. There were some signs of this weakness in real-time indicators like credit card spending.

Analysts are hopeful that this is a temporary demand and supply response to the recent spike in case counts which is now worse than the initial wave by many measures. Currently, the U.S. is seeing 150,000 new cases a day with many experts warnings of another bump following Labor Day. 400,000 people reported not being able to work for pandemic-related reasons, bringing the total to 5.6 million.

There were some silver linings to the report as July and June jobs numbers were revised higher by 134,000. Wage growth also continued and came in above expectations at 4.3% on an annual basis and 0.6% on a monthly basis.

Also, wages continued to accelerate, rising 4.3% on a year-over-year basis and 0.6% on a monthly basis. Weekly jobless claims have fallen to their lowest levels since March 2020 although the economy remains 5.6 million jobs short of its pre-pandemic level.

However, job openings are at a record high of 10.5 million. Recently, there has been a sharp uptick in postings for travel, arts, entertainment, and education which could signal that more hiring is imminent especially once case counts back off.

Additionally, some analysts believe August figures shouldn't be trusted given the difficulty of doing surveys with so many people on vacations. Nevertheless, President Joe Biden in public comments said that the disappointing jobs number increases the urgency to pass the $3.5 trillion reconciliation bill.

Stock Price Outlook

This report is marginally positive for stocks as it could push back the Fed's taper timeline. It wasn't surprising to see growth-related names underperform, while companies that benefit from lower rates outperformed.

Still, there is nothing meaningful to change one's outlook based on this report especially given that August figures shouldn't be trusted and the report is more of a function of the rise in case counts rather than a meaningful turn in the economy. Of course, if case counts continue rising and remained elevated, then that would certainly impact the outlook.