KEY DATA: Jobs: 151,000; Private Sector: 126,000; Unemployment Rate; 4.9% (unchanged); Hourly wages: +0.1%/ Trade Deficit: $5.2 billion narrower

IN A NUTSHELL: “Given how robust job gains were in June and July, the August increase was quite decent, but the slower rise hung the Fed out to dry.”

WHAT IT MEANS: If Janet Yellen and her merry band of terrified rate hikers wanted a strong jobs report to give them cover to raise rates in September, they didn’t get it. That is not to say the jobs report was weak – it wasn’t. But the number of jobs added in August was well below the nearly 275,000 average for June and July and in this political world, that means it was disappointing. The reality is these data are volatile and given the outsized increases early in the summer, some give back was expected. That said, the report was just okay. Job losses in manufacturing were greater than forecast. The decline in construction payrolls, though, may be due more to a lack of skilled workers than the need to hire more workers. Construction is not faltering. And the sharp rise in local government hiring was strange because it wasn’t all in education. Schools are opening earlier, messing up the seasonal adjustments. But there was also a sharp rise in non-education local government workers, which may be signaling a come back in the financial position of this sector. The unemployment rate was stable as was the labor force participation rate. But hours worked were down and wages rose modestly, so there still is some slack in the market.

The trade deficit narrowed much more sharply than expected. There was a huge increase in exports but a decline in imports. Given the strength of the U.S. economy, weakness of the world economy and the relatively strong dollar, that pattern was also a surprise. Food exports led the way with soybeans being the prime mover. I guess the demand for tofu around the world is surging. We also sold more industrial supplies and vehicles, but demand for our capital goods was down. On the import side, food and industrial supplies demand rose but consumer goods, vehicles and capital goods imports were off.

MARKETS AND FED POLICY IMPLICATIONS: The jobs report was less than hoped for but probably as good as could be expected. Unfortunately, the nuance that the data are volatile and there is often some give back for outsized increases is rarely considered. This report was mediocre, but it was just one after two huge ones. That reminds us not to base economic judgment on the data from one month. Really now, was the job market booming in June and July only to collapse in August? Give me a break. Actually, 151,000 is well above the number needed to keep the unemployment rate moving down on a slow but steady pace. And let’s not forget that the closer you get to full employment – and we are nearly there – the more difficult it is to find workers. Adding to my belief the economy is in good shape was the greater-than-expected narrowing in the trade deficit. It is possible that trade could add to third quarter growth. If that happens, a 3.5% rate is hardly out of the question. But in this world of one number, the key number today was payrolls, which wasn’t nearly strong enough to give the Fed the cover it wanted (even if it didn’t need it) to raise rates in September. Right now, it doesn’t look like the next move will be before December. The Fed will likely miss a perfect time when there are no major negative issues worrying the world, which is different than the other meetings this year. With a rate hike likely out for September, investors will probably breathe easier.