The 29K jobs created in today's payroll report is not a good sign. Fewer jobs created with lower pay bumps and inflation increasing at the same or higher rate - doesn’t sound promising, and most likely doesn’t call for an interest rate hike. I would be worried a little more about the economy. Don't chase the stock rally.
The market rewarded a poor payrolls report with a 1% gain, because it believed that with just 29,000 jobs created, there is a a very small chance of an interest rate hike in October. The CME watch tool is predicting a 20% chance of a hike at the Oct FOMC meeting.
Given the downward revisions for the previous months and the small increase in hourly earnings, I think that chances of a rate hike are zero.
As of writing the S&P is up 0.8% and the 10-year treasury has declined to 5.24%, after dropping all the way to 5.18%. That is something to ponder, the 10-year increased from its day's low, it's not thrown in the towel because of poor payroll growth.
U.S. Non-Farm payrolls added just 29,000 net new jobs in September, completely missing the 88,000 consensus estimate. Sep payrolls also slowed sharply from the previous month’s gain of 133,000, which was revised lower from 162,000 in August. As was July by 31,000 jobs from a positive 21,000 to a negative 10,000. Taken together, job creation for July, August and September totals 152,000, for an average below 50,000 per month. We're treading water.
The Bureau of Labor Statistics is no stranger to revisions - this is normal, however, the percentage distortions will probably make me rely on ADP more, even if it is not as widely followed.
As we can see above job creation in 2026 has been quite erratic, and the three month moving average for 2026 increase stands at just 50,000 per month.
The unemployment rate increased to 4.2% from 4.1% in the prior month, also exceeding consensus estimates of 4.1%. It also went up because more folks participated with the participation rate going up a notch to 61.8% from 61.6%.
Gainers - Health care employment (+17,000) and construction (11,000) contributed to the increase.
Losers - Government (-17,000), Information (-10,000).
AHE - Average Hourly Earnings growth slowed down - Up 0.1% M/M vs. +0.3% consensus and +0.3% prior. The annualized average hourly earnings increase was 3.0% Y/Y vs. +3.2% consensus and +3.1% prior. A worrying sign on wages here -- at 3%, this is the weakest going back all the way to May 2021.
So in essence, fewer jobs created with lower pay bumps and inflation increasing at the same or higher rate - doesn’t sound promising, and most likely doesn’t call for an interest rate hike. I would be worried a little more about the economy.
“September payrolls indicate hiring slowed after August’s blowout print. Along with the uptick in the unemployment rate, this report doesn’t build a case for an October rate hike. We expect for the Fed to stay on hold for the rest of the year.”
— Anna Wong, Andrew Sacher and Eliza Winger
I would be very careful trying to chase today’s stock market gains. A knee jerk reaction could well turn out to be a dead-cat bounce or a relief rally.
