The U.S. economy added back just 194,000 jobs in September as hiring remained a bit sluggish despite the latest Covid wave beginning to ebb. Yet, the unemployment rate fell to 4.8% and wage growth remained strong. After the jobs report, the Dow Jones turned negative in volatile premarket stock market action, but tech stocks added to gains.
Private-sector payrolls rose 317,000 in September, while government jobs fell 123,000, the Labor Department said Friday.
Wall Street expected the September jobs report to show a gain of 475,000 jobs overall, including 445,000 private-sector jobs. Economists expected the unemployment rate to ease to 5.1% from August’s 5.2%.
Average hourly wage growth of 0.6% in September topped the 0.4% expected monthly gain. Annual wage growth accelerated to 4.6% from the 4.3% initially reported for August.
Job gains for July and August were revised up by a combined 169,000. August’s initially reported gain of 235,000 was revised to 366,000.
The somewhat soft September job gains came as pandemic unemployment benefits, including an extra $300 per week, ended nationwide on Labor Day weekend. Even before that, 26 states cut short the jobless aid in an effort to coax reluctant workers back into the job market.
Wage growth has strengthened as companies have competed to attract and retain workers that are in short supply, despite still-elevated unemployment. On Sept. 3, Walmart (WMT) said it’s giving 565,000 of its workers at least a $1-an-hour pay hike, bringing its average wage to $16.40. That pay hike, which takes effect Sept. 25, wasn’t reflected in the September jobs report that is based on midmonth employer and household surveys.
Dow Jones, Treasury Yields React To Jobs Report
Dow Jones futures were up and down after the 8:30 a.m. ET jobs report, recently trading down a fraction after being slightly higher before the release. The soft report wasn’t great for financial stocks.
S&P 500 futures added less than 0.1%. Nasdaq 100 futures rose 0.2%.
The stock market came under pressure in September, which saw inflation fears and Treasury yields on the rise, as the Federal Reserve moved closer to beginning to withdraw monetary accommodation. The September jobs report was expected to seal the deal for a tapering of asset purchases to be announced Nov. 3. It’s unclear if the weak job figures will push back that taper timetable.
Yet after staging a rally the past few days, the Dow Jones has climbed back to within 2.4% of its all-time high of 35,625.40 hit on Aug. 16. The Dow is up 13.6% for the year.
The S&P 500 is 3% of its Sept. 2 record high, but up 17.1% this year. The Nasdaq is 4.7% below its Sept. 7 record high, but up 13.7% year to date.
After Friday’s jobs report, the 10-year Treasury yield wavered, but held near Thursday’s nearly four-month high of 1.57%. Overnight, the benchmark yield rose as high as 1.6% overnight.
Rising Treasury yields are a positive for many financials, but overall can weigh on the stock market, especially highly valued growth names.
Wall Street economists are hoping to see labor force participation rise, which would help to ease wage pressures and alleviate concern that rising inflation will force the Fed to hike rates sooner than expected.
Be sure to read IBD’s The Big Picture column after each trading day to get the latest on the stock market trend and whether investors have a green light for buying quality stocks at a proper entry point.
Jobs Report Details
The leisure and hospitality sector added 74,000 jobs after August’s 38,000 gain. Factory employment grew by 26,000.
Construction jobs increased by 22,000. Health care and social assistance payrolls grew 12,300. Retailers added 56,100 jobs.
The household survey, which is used to derive the unemployment rate, showed the ranks of the employed rising by 526,000, while the unemployed declined by 710,000. Those participating in the labor force — either working or looking for work — fell by 183,000, while the ranks of Americans not in the labor force rose by 338,000.
According to the monthly survey of households, 7.7 million Americans are unemployed, down from 23.1 million in April 2020, but up from 5.8 million in February 2020.
Please follow Jed Graham on Twitter at @IBD_JGraham for coverage of economic policy and financial markets.
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