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Longtime Macro Talk readers know we focus more on trend lines here than headlines.
The stark contrast between the August and September jobs reports shows exactly why.
Recall:
The 162,000 jobs added was unexpected, so I’m not saying those characterizations weren’t warranted.
But
“It bears remembering, the initial headline number in the jobs report — will be revised twice,” Elizabeth Renter, senior director of economic insights at Life360, wrote at the time. “It should always be taken with a grain of salt.”
With that in mind,
Friday’s payrolls data showed that August’s gains were revised lower by 29,000, and that the economy actually lost 10,000 jobs in July.
September’s initial headline figure of 29,000 jobs added should lead to an equally cautious read.
“Don’t panic,” economist Orphe Divounguy wrote on LinkedIn. “The labor market isn’t breaking.”
Overall diagnosis for September
“August did not signal a labor market reacceleration, and September does not signal labor market deterioration,” per Gregory Daco, chief economist at EY-Parthenon. “The broader trend indicates the labor market has settled into a lower-growth equilibrium, with narrower but still sufficient job growth to keep unemployment broadly stable.”
“There is selective weakening, but the labor market as a whole remains decent,” Rick Rieder, BlackRock CIO of Global Fixed Income, posted.
For boards and executives:
“[M]arkets are pricing in a lower probability of an interest rate hike in October. We still expect a small (25bps) hike in December,” Aaron Mulvihill, global alternatives strategist at J.P. Morgan Asset Management, noted. “A weaker jobs market makes it less likely to raise interest rates. Lower interest rates make it easier for businesses to get financing and expand, thereby boosting their equity value. Lower interest rates (= lower discounted cash flow rates) also increases the equity value of stocks that expect higher earnings in the future, like AI companies.”
But — “businesses still have plenty of reasons to hesitate before expanding payrolls: tariffs, the oil shock from the Iran conflict, and uncertainty over how AI will change staffing needs,” Divounguy cautioned.
For workers:
“The economy looks more resilient than it feels to most workers. That disconnect is fueling consumer angst,” Diane Swonk, chief economist at KPMG, said.
“If you lose your job, finding another one is still harder than it was before the pandemic,” noted Divounguy. “The job-finding probability was 26.4% in September, compared with a 27.6% average in 2018–19.”
The most notable job gains came from healthcare, construction and manufacturing, while information services and financial services lost jobs.
Wage growth also cooled: average hourly earnings rose 0.1% in September, vs. 0.3% in August.
More Job Decoder:
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