Bad news for jobs, fabulous news for investors

Just in time for Friday happy hour, jobs data has served up a heady cocktail of good and bad news.

The bad: The US labor market limped along in September, adding just 29,000 jobs—far below the 84,000 hires analysts were expecting. Unemployment also crept up from 4.1% to 4.2%, while annual wage growth came in weak at 3%, the lowest level in five years.

Now, the good: Markets are having a field day, since this all but kills the odds that the Federal Reserve will hike rates at its next meeting later this month. The wind was already blowing in this direction after the Fed’s favorite inflation gauge, the Personal Consumption Expenditures price index, came in cooler than expected at 3.4% on Wednesday. Today’s jobs numbers serve as the “nail in the coffin for an October hike,” Jefferies Chief US Economist Thomas Simons said in a note.

Most of the job gains came from healthcare (up 17,000), construction (+11,000), and manufacturing (+9,000). On the losing end: Government employment fell by 17,000, temp help by 11,000, and information services by 10,000—a decline that tracks with growing concerns of AI replacing these roles. Financial activities rounded out the losses, down 7,000.

September’s soft job numbers came with negative revisions of earlier months, too: August gains were slashed to 133,000 jobs, while July switched from gains to a loss of 10,000. That adds up to 60,000 fewer jobs than we thought we had.

The Fed’s next hike

But back to the silver lining: The Fed’s odds of holding rates steady at its next meeting have jumped to 77.3%, according to CME Group’s FedWatch tool. Just last week, markets had priced in 70% odds of a hike. This new turn of events could help keep a lid on borrowing costs for mortgages, car loans, and more, which have been climbing amid rising oil prices and the Fed’s last rate hike in September.

On top of labor data, several Fed officials piped up this week to say they saw “no need for urgency” to raise rates. Fed projections last month predicted at least one more hike as likely this year. After October, there’s just one more opportunity to deliver it: December. CME forecasts a 66.7% chance of a quarter-point hike then.

Only time will tell what that means for our Christmas lists. But if Santa’s taking requests, lower rates could be the best stocking stuffer anyone could wish for.—JD