4 Oct

September Nonfarm Payroll Is a Mixed Bag for Stocks

WRITTEN BY Mohit Oberoi, CFA
  • The Bureau of Labor Statistics released the September nonfarm payroll data today. While September’s job data was lower than expected, August’s nonfarm payroll data was revised sharply higher.
  • The unemployment rate also dipped in September. Overall, the September nonfarm data is a mixed bag for stock markets. Notably, the employment data is closely scrutinized as a recession indicator.

September nonfarm payroll

Today, the Bureau of Labor Statistics released its September nonfarm payroll data, which was a mixed bag for markets.

Nonfarm payroll increased by 136,000 in September, which was lower than expected. However, the August nonfarm payroll data was sharply revised upward to 168,000 from 130,000. July’s nonfarm payroll was also revised upward by 7,000.

In September, the unemployment rate dipped from 3.7% to 3.5%. September’s unemployment rate is the lowest since December 1969. Notably, the labor force participation rate was stable at 63.2% in September.

Job additions have slowed down but are still strong

The US economy is adding fewer jobs this year compared to last year. According to the Bureau of Labor Statistics, nonfarm payrolls have averaged 161,000 per month in the first nine months of 2019. The corresponding figure for last year was 223,000.

Nonetheless, the US job market has been strong overall. Importantly, monthly job additions are comfortably above the 100,000 level, which analysts see as a sign of strong job market.

Why the data is important

Pundits have been forecasting a recession for quite some time now. The ISM PMI (purchasing managers’ index) data provided further fodder to bears. However, the September nonfarm payroll data should help allay some of these recession fears.

Notably, the strong US job market has been the backbone of the US economy. A strong job market propels consumer sentiment and helps fuel consumption. Plus, the US consumer sector has looked strong. Seemingly, US consumers are paying little heed to the recession pundits.

The US stock markets are in the green today, and the S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) were up 0.77% and 0.78%, respectively, at 11:30 AM EDT.

However, automotive stocks are in the red today. General Motors (GM) and Tesla (TSLA) are down 0.54% and 1.5%, respectively. Ford (F) is trading flat. Tesla is still reeling under bearish sentiments after its Q3 deliveries disappointed slightly yesterday. Nonetheless, Tesla achieved another quarter of record deliveries in the quarter.

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