EmailThursday marked the fourth straight session that the S&P 500 recorded a gain. The 0.7% increase was the largest in that streak and it left the S&P 500 up 1.4% for the week.
Suffice it to say, the month of October and the fourth quarter have gotten off to a good start, continuing a policy-charged rally (monetary, not fiscal) that began on June 1.
The release of the FOMC Minutes yesterday was a timely reminder of what helped get us here. On that note, it was only fitting that ECB President Draghi said in a press conference yesterday, following the latest ECB meeting, that the euro is irreversible and that the ECB stands ready to activate its Outright Monetary Transactions.
The idea of central bank puts has put a floor under the market and the bulls have danced all over it.
The September employment report suggests they will keep their dance shoes on, if for no other reason than it suggests the Fed still does not have a strong rationale for pulling back on its extraordinarily accommodative policy.
In sum, the September employment report was neither too hot nor too cold. To say it was just right, however, is overstating things.
Nonfarm payrolls rose by 114,000 (Briefing.com consensus 120,000), but were revised up for both July (from 141,000 to 181,000) and August (from 96,000 to 142,000). Private payrolls increased by 104,000 (Briefing.com consensus 130,000), up slightly from 97,000 in the prior month.
Average hourly earnings rose 0.3% (Briefing.com consensus 0.2%; prior 0.0%) and the average workweek moved up 0.1 to 34.5 hours (Briefing.com consensus 34.4).
What will stand out in the headlines, though, is the drop in the unemployment rate from 8.1% to 7.8%. That is the lowest unemployment rate since January 2009.
The notable thing about the drop in the unemployment rate is that it was not a function of a lower participation rate. On the contrary, the labor force participation rate ticked up to 63.6% to 63.5%.
The driver behind the drop in unemployment was more people finding jobs. To wit, the number of employed people increased by 873,000 while the number of unemployed people dropped by 456,000.
That is the good news. The not-so-good news is that the number of people working part-time for economic reasons jumped by 582,000, which accounts for 67% of the increase in the number of employed people. Having a job is better than not having a job, yet part-time jobs come with lower wages and benefits (and perhaps no benefits) than full-time positions.
The U-6 unemployment rate, which is a measure of workers unemployed and underemployed and is oftentimes referred to as the "real unemployment rate," held steady at 14.7%. Meanwhile, the number of people out of work for 27 weeks or longer ticked up to 40.1% of total unemployed versus 40.0% in August.
The labor market is not great right now, yet the takeaway from the September report is that it is better overall than it was in August. Still, "better" has to be translated in relative terms.
The S&P futures added to their gains in the wake of the report. They are currently trading 0.5% above fair value, setting the dance stage for a higher open for the cash market.
