September Jobs Report Blasts Through Estimates, Bonds and Stocks Are Mixed

Key takeaways

• The September nonfarm payrolls report arrived at double expectations for the month
• The unemployment rate also held firm while wage growth softened
• Stocks finished the Friday session up, while bonds only made minor gains

The September jobs report massively surprised on the upside, with nonfarm payrolls for September over double analyst predictions. The result was way higher than in August and immediately stoked fears that the Fed might raise interest rates before the end of the year.

Instead of sending the markets into a sustained meltdown, it’s given investors hope that a strong labor market is a sign of a soft landing. Stocks finished Friday trading up, and bond yields retreated.

Here’s what you need to know about the September jobs report, what it means for the economy and whether the Fed will look to raise interest rates at the next meeting.

What happened with the September jobs report?

September nonfarm payroll data soared past expectations and added 336,000 new jobs into the economy for the month, eclipsing the Dow Jones consensus estimate of 170,000. The figure is also far above the August result, which arrived at 227,000.

The unemployment rate also surprised on the upside, coming in at 3.8% compared to the 3.7% predicted by analysts. Wage increases were also softer than anticipated, with average hourly earnings only up by 0.2% for the month and 4.2% from the same time last year.

So, is it good news or bad news? Depends on how you interpret it.

What was the market reaction?

Ahead of the data, the markets had been jittery thanks to multi-year highs in the bonds market spooking investors. Stocks quickly began to fall as the markets digested the data, but in a last-ditch effort to shrug off the bad news and interpret the strong labor market as a soft landing signal, actually rose again during trading.

The Dow Jones closed Friday’s trading up 272 points, or 0.8%, while the S&P 500 had the same growth. The tech-heavy Nasdaq Composite gained 1%.

The bonds market also began to rise initially, but the benchmark 10-year note yield fell back to 4.77%, which was only up a 0.05 percentage point.

As for whether the Fed will introduce more interest rates to counter too-hot inflation? The CME FedWatch’s tool saw confidence slip immediately after the results, but the market are still 85% convinced the Fed will hold interest rates steady in November and 70% in December. That would mean at least no interest rate rises for the rest of the year.

The bottom line

The jobs report was a big surprise to everyone, though the stock markets still managed to find a positive spin on the result and figured a big gain like that was indicative of a soft landing. It’s hard to tell what the next move from the Fed might be, though another increase when everyone expects a pause could further spook the markets.