Place your bets on the jobs report
The ADP private sector number Wednesday may have been weak. But jobless claims filings are still low. What will the official government data for September look like? We'll find out Friday.
The labor market is still in pretty healthy shape…even though some small cracks might be starting to form. (Says the guy who was laid off from a more than two decades long job in March.)
Yes, payroll processor ADP reported Wednesday that a fairly anemic 89,000 private sector jobs were added last month. But the government reported Thursday that the number of people filing for weekly unemployment benefits rose only modestly from a week ago and was below economists’ forecasts. What’s more, the 207,000 people filling for jobless claims remains near historic (and pandemic-era) lows.
But all of these numbers (as well as the JOLTs report earlier this week that showed an increase in job openings in August) are just the labor market data amuse-bouche before the main course that comes on Friday when the Bureau of Labor Statistics releases the official September jobs numbers. Economists surveyed by Reuters are expecting that 170,000 jobs were added last month. That would still be a healthy addition but it would be a slowdown from the 187,000 added in August. (The August number, as well as data for the prior two months, will be revised though.)
Investors, consumers, Federal Reserve members and politicians will all be poring over the data. What will the latest jobs figures say about the health of the economy? The future of interest rates? The state of inflation?
Keep in mind that the unemployment rate inched a little higher last month, to 3.8%. Will that figure continue to creep higher? As for wages, which are a key factor in inflation, investors (although not necessarily workers and job seekers) will be hoping for pay growth to continue to moderate. Average hourly earnings rose 4.3% year-over-year in August, down slightly from the 4.4% annualized rate in July.
There’s a lot at play here. The stock market, which has recently cooled off due to a big spike in long-term bond yields, could dip further if Friday’s jobs numbers are too robust. That could signal that inflation remains a threat and that the Fed will need to keep raising short-term rates to keep prices in check. That, in turn, would likely put upward pressure on long-term yields….and that could lead to even higher mortgage rates and other borrowing costs. In other words, consumers could pull back.
But at the same time, a set of jobs numbers that are too weak would set off more recession alarm bells. People would start to wonder if the Fed raised rates too aggressively, leading to a more severe economic downturn that necessary.
Fortunately, we only have to wait a little longer to get the September jobs data dump. I’ll have analysis here tomorrow morning.