Friday’s payrolls report showed the addition of 254K jobs in the U.S. in September, significantly higher than the 132K consensus. The data pointed to strong hiring in the labor market and led to investors dialing back their expectations for another large 50 basis point interest rate cut by the Federal Reserve in November to zero. For the week, the S&P added 0.2%, while the Nasdaq Composite gained 0.1%. The Dow also rose 0.1%.
The data shows that the job market remains resilient and the economy—slowing as desired by the Federal Reserve—isn’t at risk of stalling. Fed Chair Jerome Powell, this week, reaffirmed that shielding the labor market was part of the reason why the Fed decided to kick off its easing cycle with a larger rate cut. The data is a welcome development for Powell and his colleagues, who apparently seek no further cooling of the job market. The figures also support hopes for a soft landing as the Fed tries to stamp out the last vestiges of inflation.
All the data points to a strong economy that could fuel further new highs in the stock market in Q4 2024.
Future Wealth’s View
Behind the strong jobs report lies the strength of the consumer. Global food inflation is the highest it has been in the last 18 months. Everything from sugar (up 10% in the past month), Cereal (up 3% in the past month), Diary (up 3.8% in the past month) to Vegetable oil (up 4.8% in the past month) are going to strain the trajectory of inflation from the current levels. It is widely believed that getting to the Fed’s inflation 2% target could take longer than expected. But, despite high prices and rising home costs, consumer spending on burgers, travel and vacations continue to be robust even as layoffs in tech and manufacturing continue to mount. New jobs in retail and dining leads us to believe that sector rotation is well underway and it is critical for investors to look at the pockets of weakness and strength in the jobs numbers and make investment decisions accordingly.
Barring an unforeseen event in the next few months, we expect the stock market could have us singing “Merry Christmas” without any reservations.