In a continuation of last month's trend and another alarming development which seem to indicate that the economy is rapidly slowing, the U.S. Department of Labor came out with the September jobs report which showed that the U.S. economy only added 194,000 jobs during September. This figure fell well short of analysts' expectations that the economy would be adding around 500,000 jobs in the month.

The unemployment rate slid further to 4.8%, which was more than expectations of 5.1% although this was more due to people dropping out of the labor force. Sectors contributing to jobs growth were leisure and hospitality and services, while government jobs saw sharp cuts. Overall, the jobs report raises several, interesting questions - how much of the weak jobs number was due to elevated coronavirus fears? will this and last month's weakness in the labor market alter the Federal Reserve's timetable for tapering and eventually hiking rates? and why was there such a muted, positive impact from the expiration of unemployment benefits?

Inside the Numbers

The jobs report only raises these questions rather than answer them. The optimistic interpretation of the jobs report is that it was adversely impacted by the coronavirus, some forward-looking growth indicators like Treasury yields are moving higher, and case counts look like they have made a major peak as we are down more than 50% from recent highs. Therefore, it's possible that Q4 could see more hiring as this headwind is no longer an issue.

Additionally, the biggest loss of jobs - government at 123,000 is unlikely to repeat, while private payrolls increased by a healthier 317,000. The underwhelming report is also surprising as all anecdotal evidence indicates that employers are desperate to find workers.

Wages were a bright spot, up 0.6% on a monthly basis and 4.6% on an annual basis. Wages are now higher than they were pre-pandemic by a decent margin. However, the total available workforce remains 3.1 million short of where it was in February 2020 and it declined by 183,000 in September. It was expected that this would expand given the expiration of enhanced unemployment benefits.

Some reopening tailwinds were evident in the report with leisure and hospitality adding 74,000 positions and the unemployment rate for the sector falling to 7.7% from 9.1%. Services added 60,000 jobs and retail gained 54,000. Due to seasonal adjustments, we saw local government education jobs decline by 144,000.

Another factor is that the survey week came just when coronavirus cases were parking at around 180,000 per day. Currently, the measure is around 80,000.

Stock Price Impact

Despite the miss, stocks were mostly unchanged with Treasury yields finishing higher on the day. Currently, the market is bouncing off its 4,300 low and 3.2% off from it's all-time highs.