Wall Street Responds to Stronger-Than-Expected Jobs Report

Wall Street analysts reacted to a stronger-than-expected jobs report for September, indicating it may influence the Federal Reserve’s approach to rate cuts.

The report revealed an addition of 254,000 non-farm payrolls, which Capital Economics interpreted as a sign of labor market resilience. Consequently, the firm anticipates that the Fed will likely opt for a 25 basis point (bps) rate cut.

Additionally, the unemployment rate dipped to 4.1%, and average hourly earnings saw a significant month-over-month increase of 0.4%, which brings annual wage growth to 4.0%. Capital Economics remarked, “The real debate at the Fed should be about whether to loosen monetary policy at all,” suggesting that conversations around a 50bps cut are no longer relevant.

Similarly, Vital Knowledge expressed that recent positive economic indicators, including a robust services ISM report and favorable GDP revisions, imply the Fed may slow its rate-cutting pace to 25bps in November. Despite this, they maintain a positive outlook, stating, “Stocks shouldn’t mind given that rate cuts are still happening.”

Evercore ISI described the jobs report as a “stronger-than-expected” sign that reassures the Fed it is keeping pace with economic conditions. They anticipate a 25bps rate cut in November while noting that the data indicates the overall business cycle remains strong. Evercore highlighted that while the payroll gains are impressive, they aren’t significant enough to disrupt the Fed’s gradual easing plans.

Morgan Stanley acknowledged that even with some weakness in the manufacturing sector, the broader reacceleration in the labor market supports expectations of 25bps rate cuts in both November and December. They stated, “Strong payroll incomes support consumption going into the fourth quarter,” further bolstering the case for continued rate reductions. They also indicated that Fed Chair Powell’s outlook favors 25bps cuts, assuming there are no signs of further cooling in the economy. This report suggests a rebound from the previous summer’s labor market softness.