Economists were expecting a light October jobs report this morning with projections from economists surveyed by Bloomberg at 195,000.
Instead, the Labor Department reported that the economy added 261,000 jobs in October. (And revised the September report up to 315,000 added jobs from the previously reported 263,000.)
You might have expected stocks to fall on this report’s evidence that the Federal Reserve’s interest rate increases have yet to significantly slow the labor market.
But you would have been wrong. As of the close in New York, the Standard & Poor’s 500 was up 1.32% and the Dow Jones Industrial Average had gained 1.26%. The NASDAQ Composite was higher by 1.28% and the NASDAQ 100 was ahead 1.56%. The small-cap Russell 2000 index was up 1.13%.
It has been interesting to watch Wall Street spin these numbers into good news on Fed policy. The take seems to be that the labor market is softening with the pace of job gains down since the beginning of 2022. The official unemployment rate did climb to 3.7% from 3.6% in September.
But, I’d note, average hourly earnings rose 0.4% month over month and average hourly earnings are now up 4.7% year over year. That’s not progress, by my definition anyway, on the wage inflation front.
This quote on Bloomberg this morning sums up the hopeful read of this morning’s data: “The bottom line here is that the labor market is softening, but has not yet reached the point where the data are screaming at the Fed to stop tightening,” Pantheon Macroeconomics Chief Economist Ian Shepherdson wrote in a note cited by Bloomberg. “But if these trends continue, as we expect, markets will start to push the Fed–and especially Chair Powell–to rethink the idea of continued hikes next year.”
Yep, if the trend in the softening trend in the labor market, which only Wall Street can see in today’s data, continues, then the Fed will be under pressure to rethink interest rate hikes next year.
Of course, if the inflation doesn’t slow appreciatively in early 2023, the Fed may well overshoot increase rate increases and send the economy into recession in 2023.
“If.” Such a small word.
By the way, the CBOE S&P 500 Volatility Index (VIX), the so-called “fear index,” had retreated by 2.096% to 24.55 at the close.