In my view the employment report was relatively strong in many dimensions. Both private sector and non-farm payrolls were considerably higher than expected and so were the revisions from August. The jobless rate fell to 5.9%, the lowest rate since July 2008’s level of 6.1%. Average hourly earnings and hours worked also exceeded expectations both of which are precursors for future job gains.
On the negative side, the labor participation rate (LPR) decreased to 62.7% from 62.8% the month before, the lowest since February 1978 a statistic in my view is a reason why a vast majority of society thinks the country is headed in the wrong direction.
I think this data does little to change monetary policy assumptions. The job and wage growth are strong positives but the LPR is a strong negative thus cancelling each other out as it regards to monetary policy.
Regarding possible electoral implications, as I wrote Friday I think this data does little to boost the President’s claims about his economic policies and in fact may be the inverse given the low LPR. Any declarative statements might be viewed as the President’s party is out of touch with the electorate.
Third quarter earnings season commences Wednesday. There has been little narrative leading into the season given the intense attention focused on Ebola, ISIL, the Ukraine, etc. Most are expecting results to again exceed expectations for the gazillionith quarter.
Similar to the second quarter, I think many will focus upon revenue gains and how such gains relate back to third quarter growth assumptions and momentum leading into the fourth quarter.
Moreover many will be listening about the impact of the rising dollar. According to CNBC it has risen in value for a record 12 consecutive weeks.
In my view, any earning gains need to come from sales growth as productivity gains will be difficult given the efficiency and leanness of corporate America.
Returning back to the jobs data, equities rebounded sharply as the prices were fully discounted for most scenarios. The rally was broad based as all major indices including the hapless Russell 2000 posting 1% plus gains.
This is a relatively slow data week with perhaps Wednesday’s release of the Minutes from the September FOMC meeting as the marquee event. Statistics released include wholes ale inventories, import prices and weekly jobless claims.
Last night the foreign markets were up. London was up 0.45%, Paris up 0.32% and Frankfurt up 0.98%. Japan was up 1.16% and Hang Sang up 1.09%.
The Dow should open moderately higher on third quarter earning optimism. The 10-year is unchanged at 2.43%.