4 market takeaways from the big September jobs report

• The September jobs report showed 119,000 jobs added, easing fears of an economic slowdown.

• Unemployment also rose to 4.4%, slightly boosting odds of a Fed rate cut in December.

• The report also showed that alternative labor market data sources proved reliable during the shutdown.

After a 76-day wait, data-starved investors finally feasted their eyes on an official jobs report from the Bureau of Labor Statistics this morning.

It showed that the US economy added 119,000 jobs in September, smashing economists’ expectations for 53,000, and that the unemployment rate had risen to 4.4% from 4.3%.

The report initially helped boost markets alongside Nvidia’s stellar earnings, but stocks sagged again as investors continued to mull weak rate-cut odds and as valuation concerns returned to the conversation.

Still, the two-month-old data had some important takeaways for the market. Here’s what to know.

While the jobs report was strong enough to quell recession fears, it also wasn’t too strong. That means a rate cut could still be on the table for the Fed’s December meeting.

Odds of a December rate cut jumped from 30% on Wednesday to 39.5% on Thursday, according to the CME FedWatch tool.

“The Fed now has more justification to shift toward easing,” said Gina Bolvin, president of Bolvin Wealth Management Group, in an email on Thursday.

Even though rate cut odds jumped, the report didn’t leave investors with a clear answer on which way the labor market is trending, and that should make the next Fed decision tougher.

The market tumbled after jumping earlier in the day on Thursday, and part of the reversal comes as investors still see weak odds for another cut in next month. A lack of data due to the shutdown has made the Fed’s job much harder, even with the long-awaited September payroll report now in policymakers’ hands.

“The mixed messages coming from the September jobs report seem tailor-made to prompt vigorous debate at the next FOMC meeting,” Michael Feroli, the chief US economist at JPMorgan, said in a note on Thursday.

Other commentators echoed that, noting that the next policy move looks uncertain.

“Fed policymakers have been talking down the likelihood of additional rate cuts near-term after the October decision, and for good reason. The September minutes showed a good deal of harrumphing about stock market valuations, and they don’t want to add fuel to that fire,” Bill Adams, Chief Economist for Comerica Bank, said.

During the government data blackout, investors leaned on alternative data from firms like ADP; Challenger, Gray, and Christmas; The Conference Board; and state jobs data.

The September payrolls report showed those alternative sources held their own over the last few months.

“For example, the Conference Board’s labor differential had hinted at a gradual rise in unemployment, ultimately borne out by September increase to 4.4%,” said Jason Pride, chief of investment strategy and research at Glenmede, in an email on Thursday. “In addition, state-level jobless claims had indicated that the labor market was holding up reasonably well.”

Again, we’ll need a more timely update to know for sure, but September’s data showed that the labor market should continue to support consumer strength in the near term.

Investors have been fearing a slowdown among consumers all year, and the Fed has said it would move to support the job market as it weakens.

As the market approaches the critical holiday shopping season, all eyes will be on retailers for signs of continued spending or a pullback among shoppers still feeling the sting of inflation.

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