September Jobs Report: Wages Up, Hiring Down

I feel like this might be what full employment looks like.

We had a loss of 33,000 payrolls in September. That’s versus an expected plus 80,000 jobs added. It’s the first month with a negative number since 2011 – the end of a six year streak. Unemployment just fell to a sixteen year low at 4.2%.

And, most importantly, wages rose faster than expected.

Some details…

Associated Press:

 The U.S. lost 33,000 jobs in September after Hurricanes Harvey and Irma hit Texas, Florida and other Southeastern states. It was the first decline in six years.

The Labor Department says the unemployment rate fell to 4.2 percent from 4.4 percent, the lowest level since February 2001.

Wall Street Journal:

The biggest market moves so far after the report are in the Treasury and current markets.

The yield on the 10-year Treasury note shot up as much as 0.04 percentage point to 2.39%, testing a level last seen in July.

The WSJ Dollar Index, which measure the currency against 16 peers, was up 0.3%, versus 0.1% before. Gold futures accelerated losses but bounced back a bit. They were last down about 0.2%.

Stocks were muted. The S&P 500 and Dow futures remained down 0.1%.

New York Times:

The average hourly wage grew by 0.45 percent, for a year-over-year gain of 2.9 percent.

Some people will say the drop in hiring is storm related. Probably there’s something to that. But then understand that this report had revisions down for August and July, the pre-storm period. WSJ’s Ben Eisen:

August payrolls were revised up to 169,000 from 156,000, continuing a trend in recent years of moving volatile August data higher after the initial release.

However, July numbers were revised lower to 138,000 from 189,000. Altogether, revisions subtract 38,000 from the previous two months of gains.

So maybe the best way to think about this is that of course the pace of hiring is slowing. Most of the employable people are now employed. Having wages rise is a signal that hiring has gotten a little bit tougher. Why wouldn’t we expect that?

Last thing – we’ve been fooled by wage growth before. Take today’s exaggerated moves in bonds and the dollar for what they are – a little bit of excitement and maybe a touch of fear that this time, maybe, we’re really breaking into a higher rate of growth.