It turns out that Powell's "emergency" 50bps rate cut was - drumroll - another major mistake by the Fed.
Moments ago, the BLS reported that at a time when prevailing consensus was for jobs to continued their recent downward slide sparked by the near-record annual jobs revision, in September the US actually added a whopping 254K jobs, the biggest monthly increase since March...
... and above the highest estimate (which as we noted last night was from Jefferies at 220K); in fact, the number was a 4-sigma beat to the median estimate!
Some context: as UBS notes, the moving six-month average on nonfarm payrolls is 167k. The estimate is that 150k is about consistent with a return of the economy to trend growth. Which means that inflation is about to come back with a vengeance, just as the Fed launches its easing cycle.
Remarkably, while payrolls jumped by the most in half a year, the number of employed people also surged, rising by a whopping 430K, also the biggest one-month jump since March.
It wasn't just the payrolls, however, which came in far stronger than estimates: the unemployment rate also came in stronger than expected, and thanks to the jump in employed workers coupled with the decline in unemployed workers (from 7.115MM to 6.834MM), it dropped from 4.2% to 4.1% (and down from 4.3% two months ago which spared the entire recession panic).
And here is the rub, because in a vacuum the super strong jobs numbers would have been fantastic, the only issue is that they come as the Fed launches an easing cycle and as wages are once again rising as we have warned for the past 3 months. Indeed, in September, the average hourly earnings rose 0.4% sequentially, beating the estimate of 0.3%, while on an annual basis, wage growth was 4.0%, up from an upward revised 3.9% and beating the 3.8% estimate.
Developing
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