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Headline Jobs Number Comes in Lowest Since April

The big Employment Situation report — non-farm payrolls released by the U.S. Bureau of Labor Statistics (BLS) — is out this morning, and while we’re technically showing a pullback in the labor market, it’s still healthy enough to keep the Fed on course to its fourth-straight 3/4-point interest rate hike at the beginning of next month. A headline number of 263K jobs filled in the month of September is modestly below 275K expected. The Unemployment Rate ratcheted down to 3.5% from 3.7% previously.

This headline figure is the lowest since April of this year, following an unrevised 315K for August and a raised 537K from 526K originally reported for July. In this regard, we can clearly see labor market figures slimming — and this is what the Fed is looking for before they tap the brakes on interest rate hikes. But at more than a quarter-million new hires and an historically low Unemployment Rate, we do not see the “pain” Fed Chair Powell promised us when he announced the Fed will keep interest rates “higher for longer.”

Average Hourly Earnings, another main factor in terms of gauging inflation — higher wages promote higher inflation — were steady at +0.3% month over month. Year over year, we’re still at +5% wage growth, which is far from the levels the Fed will need to see before adjusting their rate hikes, though it’s down from the +5.2% registered over the previous two months. Labor Force Participation was reduced slightly to 62.3%, still underperforming historically, with the U-6 “real unemployment” at +6.7% — tied for the lowest in the cycle with June and July of this year.

Education and Healthcare brought 90K new jobs for the month, with Leisure and Hospitality at 83K. Manufacturing brought in a respectable 22K, while Government jobs lost -25K for the month. Overall, the private sector generated 288K new jobs last month. The Average Workweek was in-line month over month at 34.5 hours.

To be clear, jobs numbers are lagging indicators on recessionary conditions. Companies generally do not lay off workers unless it is absolutely necessary to do so, and we’re clearly not there yet. Thus, even though much ink — and pixels — will be spent on discussing these numbers today and perhaps through the weekend, these figures are simply not as consequential as, say, Consumer Price Index (CPI) numbers, which are out Thursday of next week.

Nevertheless, pre-market futures do not like this jobs release, and have sent the Dow, S&P 500 and Nasdaq from -130 points, -35 points and -140 points prior to the BLS report, respectively, to -300, -50 and -200 points afterwards, respectively. Many market bears are on record as stating we’ve not yet seen market lows in 2022 yet; reactions to a healthy labor market like we’re seeing this morning would tend to bear out this sentiment.

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