Headline payrolls disappointed market consensus this morning. September nonfarm payrolls fell by 35,000 month-over-month in contrast to Wall St estimates looking for an additional 80,000. To be sure, the September report was expected to be quite “noisy” given that it reflects significant weather-related effects (i.e. hurricanes). In addition, Wednesday’s ADP figures suggested that a weaker than expected September BLS report was looming on the horizon. However, there were a couple noteworthy positive developments within this morning’s report: hourly wages and labor participation.
Given that the headline figure was largely affected by storms, we are more interested in the report’s internals and those are a bit more sanguine than the headline number would suggest. The labor participation rate continues to grind higher, which in and of itself is a good sign of labor market health, and when combined with better than expected hourly wages, we have the right combination of labor market “tightness” and price pressure that the Federal Reserve is looking for. In our opinion, this report actually moves the Fed closer to a rate hike later this year, while simultaneously suggesting somewhat of a speed bump for the domestic economic growth in the near term as storm related effects fade.
As noted in our September 11 Partner Note, TWP upgraded its stance on the US dollar from bearish to neutral. We see this report as a confirmation of our current strategic market outlook. Looking through the headline noise, Total Wealth Partners remains neutral USD, neutral rates, and bullish equities.
Market Outlook: Neutral USD, Neutral Rates, Bullish Equities