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Jobs Cut in Half to 150K; Unemployment +3.9%

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Today is Jobs Friday, capping off a Jobs Week that brought us private-sector payrolls from ADP (ADP - Free Report) , JOLTS numbers for September, Jobless Claims and today’s nonfarm payroll report from the U.S. Bureau of Labor Statistics (BLS). Today’s headline jobs number is 150K, below the 170-180K expected, and well below the downwardly revised 297K the previous month. The Unemployment Rate ticked up to 3.9%.

This has helped pre-market indices, in what is becoming one of the best trading weeks in recent memory. The Dow, which has notched 500+-point gains twice already this week, is up another +150 points on this news. The S&P 500 is up another +20, while the Nasdaq, up +5% in the past five trading days, is +50 points at this hour.

Job gains coming in roughly half the previous month continues to support the Fed’s decision on Wednesday not to have raised interest rates from their current 5.25-5.50%. We’re already at the highest levels since prior to the Great Recession in 2007, and another hike would have taken us to levels not seen since prior to the tech bubble popping in 2001.

The Unemployment Rate is the highest we’ve seen since January of this year, when it was still at 4%. A year ago, we were 20 basis points (bps) lower than we are today, and while the temptation is to say the addition of Americans looking for work has increased, Labor Force Participation has ticked down to 62.7% from 62.8% the previous month. This was the highest we’d seen since February of 2020 (directly pre-Covid), but it behooves investors to pay attention to these numbers over time. The hot labor market: how much is it cooling?

Hourly Wages came in at +0.2%, the lowest since February 2022 as September’s revision moved from +0.2% to +0.3%. Again, good news for the Fed decision to stand pat on interest rates — we appear to be high enough to quash inflation metrics in the labor market. Year over year, hourly wages are up +4.1%, the lowest of our current cycle (this was +4.9% in October of last year), and the lowest figure we’ve seen since the +3.9% reported in January of 2021.

As the American economy shrinks by design, in order to curb inflation and bring it back down to 2% (or wherever the Fed may amend this in the future), monthly jobs numbers are among the most important economic prints we will see. Every metric that shows a slow-melt of inflation will be another feather in the cap of the notion that the Fed is done raising rates for the year, and for the foreseeable future. This is the biggest reason we’ve seen such a strong stock market this week, and if you’re just starting to pay attention, welcome to the show. Happy Friday!

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