September U.S. Jobs Report Signals Cooling Inflation

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The September U.S. jobs report revealed hotter-than-expected numbers. Nonfarm payroll employment climbed to 336,000 new jobs, from an estimate of 170,000.

That’s 159.6 million total.

“While job growth blew past expectations, wage growth continued to cool off, with average hourly earnings growing 4.2% year-over-year, just below consensus estimates of 4.3%,” according to Statista.

The clincher here is not just that job growth exceeded economists’ expectations. It’s that it blew past the prepandemic high of 152.4 million … by 4.5 million jobs.

Now, this report was released on Friday, October 6. It’s old news already, you might think.

But it’s a key part in the tapestry of what’s happening in the market right now. Especially as it relates to the Federal Reserve’s battle with inflation.

📈 Market Edge:

Jobs + Wages = Cooling Inflation?

Dante DeAntonio, a labor economist at Moody’s Analytics, said this about the U.S. jobs report:

“There is likely enough good news from wage growth and the unemployment rate to keep the Fed from returning to rate hikes.”

As soon as the Fed stops raising interest rates and starts cutting, that’s usually a signal for us as investors to buy back into stocks.

So when we asked Ian King for his take, he had this to add:

If you look at Fed funds futures (check out my favorite “FedWatch” tool from CME Group), you can see the probability for what traders expect. This is where Fed funds futures will be at given dates.

Fed futures contracts expire at certain times. They can indicate what the market thinks the Fed will do over the short term, as well as the long term. The contract I am focusing on right now expires in about six months, in March 2024.

A week before the jobs number came out, there was a 7.5% chance of a rate hike by the spring — 5.00% to 5.25%. Last week, we were looking at a 25% chance of a rate cut into next spring.

To me, this is a sign that says the Fed rate hiking cycle is likely over.

But, we’re also probably going to see some economic weakness soon. As for the stock market, we’re potentially going to see some cuts into next year.

I also think it’s a positive catalyst for the equity market — and a bullish development that you’re not going to hear a lot of people talking about on CNBC.

What’s Your Take?

We want to hear from you survey Daily Investment Now September US Jobs Report Signals Cooling Inflation

Are you bullish or bearish right now?

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Happy Monday!

Your Banyan Edge Team Signature Daily Investment Now September US Jobs Report Signals Cooling Inflation

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