Super-size me: An employment report drill-down
U.S. indexes green but off earlier highs; Nasdaq in front, small caps jump
Financials lead S&P sector gainers; real estate lags
Euro STOXX 600 index up ~0.5%
Dollar gains; bitcoin up >1%, crude advances; gold dips
U.S. 10-Year Treasury yield surges to ~3.97%
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SUPER-SIZE ME: AN EMPLOYMENT REPORT DRILL-DOWN
Signs of a softening labor market likely convinced the Federal Reserve to implement a double-scoop 50 basis point interest rate cut at last month's monetary meeting.
On Friday, investors were greeted with a report that suggested the jobs market is hardly softening, and on the contrary, it's going gangbusters.
American employers jacked up their payrolls USNFAR=ECI by 254,000 in September, blasting past analyst expectations and marking a 59.7% increase over the prior month.
The blockbuster number was a whopping 114,000 above consensus, the biggest upside surprise since December and the strongest monthly showing since March, in a report that should put to bed any lingering fears that the U.S. economy is in danger of recession any time soon.
Below the headline number, manufacturing shed 7,000 workers but retail rebounded, adding 15,600 jobs. Federal/state/local government payrolls grew by 31,000 and services gigs accounted for 90.6% of total private job adds.
"By virtually any measure, the September numbers broke the recent trend and provided reason for optimism in the underlying resiliency of the labor economy," writes Jim Baird, chief investment officer at Plante Moran Financial Advisors.
The report, of course, comes in the wake of Powell & Co's 50 basis point rate cut amid signs of softness in the labor market.
While Financial markets are still banking on additional reductions to the policy rate this year, they are currently pricing in a 95.2% likelihood of a smaller, 25 bp cut at the central bank's next meeting in November.
That's up from 67.9% yesterday.
The wage growth element likely caught the eye of inflation watchers.
On a monthly basis, average hourly earnings grew by 0.4%, a slight cool-down from August's upwardly revised 0.5% but faster than the 0.3% increase economists anticipated.
Year-on-year wage growth grinded higher to 4.0%, 20 basis points hotter than consensus and an uptick from last month's 3.9% reading. You'd have to go back to March for a higher annual wage growth number.
The report provides a first taste of September price growth, and offers yet another reminder that inflation's meandering path down to the Fed's 2% annual goal is littered with detours and roadblocks.
The unemployment rate USUNR=ECI unexpectedly edged down to 4.1%, which seems entirely attributable to new hires rather than any change in labor market participation.
Indeed, the participation rate held firm at a 62.7%, meaning the number of those leaving the workforce was roughly the same as those entering it.
Even so, participation remains well below the pre-pandemic average.
"The unemployment rate (is) ratcheting down, the participation rate holding steady, all of which indicate that this is not a statistical aberration that might be washed out in coming months," says Karl Schamotta, chief market strategist at Corpay.
One sign of labor market softness can be found when breaking down unemployment by duration.
The long-term jobless, or those out of work for 27 weeks or longer, accounted for a larger slice of the total unemployment pie, while the newly jobless share shrank.
Average unemployment duration jumped to 23.1 weeks, the longest since May 2022.
As suggested by the elevated continuing weekly jobless claims data, it's likely taking laid off workers longer to find
"The majority of the recent increase in the unemployment rate still has been driven by people being laid off struggling to find new work immediately," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.
Still, looking at unemployment by race and ethnicity it would appear most boats went down with the ebbing tide.
Joblessness decreased by 0.4 percentage points among Black workers and those who identify as Hispanic, and edged down 0.2 ppts for Asian and White Americans.
As a result, the White/Black jobless gap narrowed to 2.1 ppts, the lowest reading since April.
(Stephen Culp, Karen Brettell)
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FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:
U.S. STOCKS RISE IN EARLY TRADE ON STRONG PAYROLLS REPORT - CLICK HERE
A TALE OF FED'S INDEPENDENCE AND POTENTIAL TRUMP VICTORY - CLICK HERE
U.S. STOCK FUTURES RALLY, YIELDS JUMP, AFTER HOT PAYROLL DATA - CLICK HERE
ROOM FOR OPTIMISM OVER EU/UK EXPORTERS - BARCLAYS - CLICK HERE
MARKETS "OBSESSING" OVER JOBS DATA - CLICK HERE
FRANCE AND ITALY TARGET COMPANIES TO SHRINK DEFICIT: WHAT IT MEANS - CLICK HERE
STOXX IN POSITIVE TERRITORY AS REAL ESTATE AND OIL JUMP - CLICK HERE
EUROPE MARKETS HEAD FOR MIXED START; MIDDLE EAST IN FOCUS -CLICK HERE
MIDDLE EAST TENSIONS DRIVE OIL PRICES - CLICK HERE
Early trade Oct 4 https://tmsnrt.rs/4etmTpL
Nonfarm payrolls https://reut.rs/3YdTl8L
Inflation gauges https://reut.rs/3NdVqMI
Labor market participation and unemployment rate https://reut.rs/47RC6hC
Unemployment duration https://reut.rs/3NcU0SI
Unemployment by race and ethnicity https://reut.rs/3BywZag
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