I hate to say I told you so, but when the road gets bumpy…. I’m not going to lie, I’m a little grumpy this morning.
Lots and lots of chaos/news this week but let’s start with the breaking news as of today, Friday. BLS Jobs report - it literally could not have painted the picture of a stronger economy. But when we dig deeper into the report…nope, actually it’s strong through and through. In fact, unlike the major revisions down we’ve seen this year – this report actually included a revision UPWARDS on the last two jobs numbers.
Let’s break it all down.
We were expecting a slight uptick of 150,000 jobs added in September. At 5:30am this morning I got the WSJ alert: “Hiring blew past expectations.” You can guess what I said. Most of these job gains were in leisure and hospitality but healthcare and government also showed notable expansion. Sometimes when people are suspicious of the BLS jobs report, they like to turn to the household survey. That one actually showed 430,000 jobs added. The household survey also showed that unemployment fell from 4.2 to 4.051%.
Allow me to keep going with how strong this data was. It wasn’t fake jobs or seasonal jobs added. September showed 414,000 full time jobs (from the household survey) and part time jobs actually decreased by almost 100k. Oh wait, earnings increased too while hours worked decreased. We’re working smarter not harder folks. And as mentioned, the previous two months readings – where we all started talking about a weak labor market - were revised upwards by 72,000. I don’t know how that impacts your conspiracy theories regarding the jobs report being fake news, but it’s certainly worth considering.
Are we headed towards a soft landing?
It really seems like it. The Fed succeeding at curbing inflation without putting the country into a job loss recession is what is a described as a soft landing. I was a little concerned for a moment about the port worker strike impacting inflation, especially with a little help from Helene. But just in time for the weekend, the workers are back.
How bad is this?
Today’s jobs report was most definitely a buzz kill as it rains on the hopes of a 50bps rate cut at the next fed meeting. That being said, the market has already priced in 100bps of rate cuts for this year and we’ve already seen that improvement in interest rates. We got half of that at the September meeting and if the next two meetings give us 25 bps each in cuts – we should be ok. At least big picture wise on a downward interest rate trajectory.
“The resilience of the US just continues to confound expectations,” said a chief international economist at ING, James Knightley.
So… let us look at this from a positive perspective. While a weak labor market would be good for mortgage interest rates, a job loss recession is certainly not something anyone is praying for. Interest rates coming down would help affordability to buy a home, but not having a job would hurt affordability way more. It’s a fine balance.