Well, it certainly did take a while, but the Fed and the markets finally got a jobs report. Alas, it was for the month of September, so in a sense, not exactly current news, but still, some “fresh” insights, nevertheless. The underlying data did cause some confusion for investors, though, as both new job creation (nonfarm payrolls) and the unemployment rate rose in the same month. That begged the question: how can that happen?

How Can That Happen?

In order to understand the jobs data a little better, you need to know that the Bureau of Labor Statistics (BLS) conducts two separate surveys for each monthly report: the household survey and the establishment survey.

• The household survey gives us the civilian labor force, the labor force participation rate and, of course, the unemployment rate. Interestingly, it also includes its own measure of new jobs, civilian employment.
• The establishment survey consists of nonfarm payrolls, hours worked and average hourly earnings data.

Since nonfarm payrolls and the unemployment rate come from two different surveys, at times they can move in counterintuitive directions on a monthly basis, but over time, this anomaly is corrected.

Jobs Report Review

• Total nonfarm payrolls rose by more than double the consensus estimate, coming in with a gain of +119k. This resulted in the three-month moving average rising to +62k (the highest since May) vs. the prior month’s reading of +18k.
• The unemployment rate rose by +0.1 pp to 4.4%, which created some market anxiety.

However, the increase in the jobless rate was essentially due to a surge in the labor force, not necessarily layoffs. Without the increase in the labor force participation rate, the unemployment rate would have been unchanged, if not lower.

Conclusion

In terms of upcoming post-shutdown data of consequence, this was the last full Employment Situation report before the next FOMC meeting on December 10. In addition, since the BLS canceled the October Consumer Price Index (CPI) report, there won’t be another CPI release until December 18, once again after the aforementioned Fed gathering. Recent Fed-speak and the October FOMC minutes underscore a Fed “divided,” with a good number of regional bank presidents wanting to pause rate cuts while New York Fed President Williams and Governor Waller still seem to favor another easing move. The September jobs numbers and lack of additional “full” employment and inflation data until after the FOMC meeting play into the “pause” argument, but it will be a ‘close call’ with another cut still on the table.