The September jobs report showed that hiring remains quite strong, as employers added 336,000 payroll positions. The unemployment rate held steady, after jumping in August, while wage growth moderated. The S&P 500 battled back, bolting into positive territory in Friday stock market action, after falling solidly at the open as odds of a Federal Reserve rate hike grew.
Although the 10-year Treasury yield initially spiked after the jobs report, markets seemed to recover their composure pretty quickly. Tamer wage growth was a good sign, as was the steady jobless rate. One more factor also made the jobs report not as bad as initially feared, as far as the Fed is concerned. A big upward revision to job gains in July and August only reflected more government jobs, not private hiring.
Keep in mind that the September payroll report reflects very strong growth in the third quarter, but it is a lagging indicator of where the economy is headed. That's especially true now that a surge in interest rates, renewed student loan payments and higher gas prices are all hitting consumers at the same time.
Jobs Report Hits And Misses
Employment gains easily topped Wall Street's 160,000 forecast. The private-sector added 263,000 positions vs. estimates of 150,000. Meanwhile, government payrolls rose by 73,000.
Hiring gains in July and August were revised up by a combined 119,000 jobs. August's initially reported gain of 187,000 was revised to 227,000. But private-sector hiring was revised lower by 12,000, meaning government jobs were revised up by 131,000.
Is the government really on that big of a hiring binge? Maybe not. Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote that "seasonal anomalies" in measuring state and local education employment were to blame.
The unemployment rate held steady, after jumping to 3.8% from 3.5% in August. Economists expected a dip to 3.7%.
The average hourly wage rose just 0.2% on the month, below 0.3% forecasts. Annual wage growth of 4.2% came in shy of views for a steady 4.3% rate.
The September report marked a second straight month of 0.2% wage growth. The 4.2% annual gain was the softest since June 2021. On a 3-month annualized basis, wage growth slowed to 3.3%, not far off the Fed's preferred 3% level.
If not for slower wage growth, market reaction to the jobs report may have been much worse.
Household Survey
The headline job and wage figures come from the Labor Department's monthly survey of employers. The separate household survey details labor force participation, work status and the unemployment rate.
Household survey data showed the ranks of the employed rising 86,000 and unemployed growing by 5,000 as 90,000 people joined the labor force. The labor force participation rate, a measure of those working or actively seeking work as a share of the 16-and-up population, held at 62.8%.
S&P 500, 10-Year Treasury Yield Reaction
The S&P 500 traded up about 1% around noon on Friday, recovering after a 1% slide in S&P 500 futures soon after the jobs report.
Through Thursday, the S&P 500 had fallen 7.2% from its July 31 rally high, as the Fed has sounded the alarm about a run of strong economic data, even as core inflation has kept falling.
The 10-year Treasury jumped 5 basis points to 4.77%, but had surged to a fresh 16-year high of 4.89% shortly after the release. The 10-year yield has surged almost 50 basis points since Sept. 20, when the Fed signaled it will take higher-than-expected interest rates to wrestle inflation back to 2%.
Be sure to read IBD's The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
Federal Reserve Rate-Hike Odds
Ahead of the jobs report, markets were pricing in 22% odds of an additional quarter-point Fed rate hike on Nov. 1, rising to 34% for the Dec. 13 meeting.
Those odds rose to 27% for a Nov. 1 hike and 42% for a Dec. 13 hike after the report.
More Jobs Report Details
Leisure and hospitality sector employment rose by 96,000. Health care and social assistance employers added 66,000 jobs. Retailers added 20,000 workers.
Construction jobs rose by 11,000. Manufacturers added 17,000 jobs.
There weren't many soft spots, though temporary help services shed 4,000 jobs.
