After the report: September Payrolls

We’ve just had the payrolls report and the key data is below: 

Labour Market Report (Sep) #NFP: 194k v 500k exp. (prev 235k) Unemp Rate: 4.8% v 5.1% exp. (prev 5.2%) AHE (MoM): 0.6% v 0.4% exp. (prev 0.6%) AHE (YoY): 4.6% v 4.6% exp. (prev 4.3%) Participation: 61.6% v 61.7% prev

Thanks to someone on Twitter who easily compiled this for me to snatch from Tweetdeck. 

There’s no question that this is a big miss - people were expecting an uptick in participation and it just isn’t there. What is clear is that there are surging hourly earnings and the employment gains still aren’t there. 194k is pretty disastrous I have to say. One other thing worth noting is that there were significant upward revision to the previous month which means this number isn’t quite as out of line as you might first expect. 

In my view, this doesn’t really change anything and the Fed really should still be on track to announce a taper at the November meeting. Remember this is not monetary policy tightening, it is simply adding less accommodation. It will not be tightening until all QE has ended. 

For stocks, this seems like a good number over the medium-term and won’t change much. Obviously, the Fed will continue to emphasise that there is still a long way to go with the unemployment rate where it is, and from my perspective I anticipate no liftoff in rates until 2023 despite climbing inflation. The unemployment rate is dramatically lower though. The story may be different in other economies where the central banks have a single mandate for price stability, but in the US at least, I suspect the Fed can justify being on hold for a while. 

For me, this definitely raises some questions about labour market tightness. 

Annoyingly, I stupidly got tripped into a gold position before the payrolls report, and this naturally got stopped out pretty quick. Lesson learned - cancel pending orders before key data releases. 

The next key news to look for is US CPI data coming Wednesday next week. I will try to get a primer and reaction note out for that too! 

As always, if you’ve got any trade ideas, specific stocks to talk about or just want to have a chat about the current state of the market, drop me a message via the form to the right or just message me on any social media. 

Happy Trading All.