September employment: Some sizzle in a cooling trend

Wells Fargo Research Team Wells Fargo

Summary

The September employment report was strong across the board. Nonfarm payrolls jumped by 254K in the month, the hottest reading since March, and job growth in August and July was revised higher by a cumulative 72K. Coming into today, the three-month moving average on monthly nonfarm payroll growth was 116K. Today's print, when paired with the upward revisions, pushes the three-month moving average up to a much more robust 186K. The separate household survey from which the unemployment rate is derived also showed signs of a labor market that is coming into balance rather than collapsing. Employment as measured by the household survey outpaced growth in the labor force, pushing the unemployment rate down by one-tenth to 4.1%.

Today's employment report is welcome news and suggests that the soft readings over the prior few months were not a sign of an imminent and sharp increase in unemployment. That said, one point does not make a trend, and there is still plenty of evidence to suggest that the labor market is cooling. That this cooling appears to be gradual rather than sudden reinforces our view that the FOMC will opt for a 25 bps reduction in the fed funds rate at its November 7 meeting instead of a second-straight 50 bps rate cut.

September jobs report bucks cooling trend

Nonfarm payroll growth in September blew past expectations, expanding by 254K compared to a consensus forecast of 150K. Perhaps even more encouragingly, job growth in August and July was revised higher, reversing a string of reports when the revisions to job growth in prior months were negative. Coming into today, the three-month moving average on monthly nonfarm payroll growth was 116K. Today's print, when paired with the upward revisions, pushes the three-month moving average up to a much more robust 186K. The sectors that have led the charge on employment growth in recent months once again posted strong gains. Leisure & hospitality (+78K), healthcare (+45K), government (+31K) and social assistance (+27K) accounted for 71% of the job growth in September despite only accounting for roughly 40% of total employment. Overall hiring was more widespread in September, with the diffusion index of industries adding jobs rising to 57.6. However, the amount of jobs added by various other industries was still somewhat underwhelming. For example, professional & business services were up by 17K, finance up 5K and information up 4K. Manufacturers continued to shed jobs last month (-7K), while hiring at temporary staffing agencies fell for the 28th time in 30 months.

Download The Full Economic Indicator

Author

Wells Fargo Research Team

Wells Fargo

GBP/USD hits multi-week tops around 1.3560

GBP/USD gathers fresh steam and advances to new three-month peaks near the 1.3560 zone on Friday. Cable’s sharp move higher comes after three daily drops in a row and follows the increasing selling pressure hurting the Greenback.

EUR/USD pops to fresh two-month highs, targets 1.1600

EUR/USD advances markedly, revisiting the upper 1.1500s for the first time since mid-June. The pair’s sharp uptick comes on the back of a strong retracement in the US Dollar amid BoJ intervention chatter and despite steady uncertainty in the Middle East.

Gold picks up pace, approaches $4,400

Gold rebounds toward the $4,400 mark per troy ounce on Friday, reversing the previous day’s pullback. The precious metal’s recovery comes as fresh and intense weakness keep weighing on the US Dollar, while traders keep assessing easing expectations of an imminent Fed interest rate hike and the situation from the Middle East.

Pi Network Price Forecast: PI extends consolidation as bulls eye $0.10

Pi Network (PI) price holds steady on Friday, maintaining a consolidating tone for three consecutive days. Mild retail strength in the PI token remains stable, with Open Interest above $9 million, while social buzz eases. PI token’s technical outlook is mixed, as bearish momentum wanes to neutral, with bulls eyeing the $0.1000 psychological level.

Weekly focus: Some relief in US inflation concerns

Actual inflation data for July came out as expected with a 0.1% m/m increase in headline CPI and 0.2% excluding food and energy. Annual headline inflation remains too high at 3.4% and means that wage earners are experiencing stagnating spending power at best, and core inflation is a bit higher than the inflation target of two percent would suggest.

Why is Crude Oil priced for a reopening the ships haven't made?

Fourteen vessels crossed the Strait of Hormuz on Tuesday. Before the war, the count ran near 120 a day. In the sessions since the waterway was publicly declared open, Brent has drifted back to $87 and West Texas Intermediate (WTI) to $81, both a little lower again on Wednesday, with daily momentum on each unwound from the top of its range in late July to the low twenties now.