Wall Street Breakfast: Payrolls In Focus
Payrolls in focus
As the Federal Reserve is now more confident that inflation is sustainably easing toward 2%, it is shifting some of its attention to the “maximum employment” part of its dual mandate. The Labor Department’s closely watched nonfarm payrolls report due this morning is expected to show that the labor market is continuing to ease.
Employment check: In recent months, job creation activity has moderated and the unemployment rate has risen, though it’s still at a historically low level. Fed Chair Jerome Powell recently said, “we do not seek nor welcome further cooling in labor market conditions,” indicating that jobs have become more of a concern. This week saw two key data points – job openings unexpectedly jumped in August, while private nonfarm payrolls strengthened more than expected in September.
What to expect: The nonfarm payrolls number is expected to show 132.5K jobs were added in September, down from 142K in August. The consensus may be on the low side, according to Sam Millette, director of fixed income at Commonwealth Financial Network, who wouldn’t be surprised by a move closer to 200K. Diane Swonk, chief economist at KPMG, is anticipating a subdued print of 120K, noting the slower pace of hiring, lower quits rate and smaller wage boost for people who change jobs.
SA commentary: “The markets may have fallen into a false sense of security ahead of the September job report,” cautioned Michael Kramer, who manages Investing Group Leader Mott Capital. While continuing jobless claims have remained calm, the market appears to have taken that to mean that the labor market is fine. “This leaves the market vulnerable to an upside surprise in the unemployment rate because the claims data doesn’t capture everything that goes into rising unemployment.”