Morning Notes — Jobs Report

Today’s Jobs Report came in mostly inline, reaffirming outlook. Non-farm payrolls were up +263,000 in September vs. consensus for +250,000. The Unemployment Rate and Participation Rate went in the wrong direction from a Fed perspective, down 20bp to 3.5% and down 10bp to 62.3%, respectively. Wages were the one bright spot, staying unchanged at +0.3% MoM vs. consensus for +0.4%.

Fedspeak continues to be mixed with some officials introducing softer language. Most recently Governor Waller stayed with a hawkish message, advocating for additional rate hikes into next year and not considering a pause on financial stability concerns.

We reaffirm expectations that a Q4 rally has begun based on momentum divergence and buy signals Monday at deep oversold levels. Terminal rate expectations are up 5.6bp this morning to 4.64% after a mostly inline September BLS Jobs Report. Labor markets always lag in any cycle and the BLS Jobs Report is a blunt instrument when assessing change at the margin. High-frequency labor market data have already begun to roll over and the BLS report should follow.  However, supportive near-term macro conditions are required to confirm Monday’s technical buy signals with next Thursday’s CPI print in view.