For some months the performance of public markets, both fixed income and equities, brooked few doubters. As one strategist put it, “Stocks have become a buy high, sell higher asset class.” 

All that changed last week. July’s labor report showed the US economy added only 114k jobs, down sharply from June’s level of 179k. Unemployment rose to 4.3% from 4.1%. Markets (as they say) swooned on the news. Confidence in the economy was replaced by worries that the Fed had waited too long and would now be forced to cut rates quickly to avoid a recession. 

As so often happens in these situations, cooler heads took the time to read the details of the jobs data. Turns out the numbers of unemployed increased in part because the numbers of jobseekers increased. In fact, the participation rate of 84% was the highest in twenty-three years! And over 70% of job losses were temporary, mainly weather-related, layoffs.