US Economy Adds Just 194,000 Jobs In September: Experts React To Second Straight Major Miss

The SPDR S&P 500 ETF Trust SPY traded slightly higher Friday morning after the Labor Department reported its second straight disappointing monthly jobs reports.

The U.S. added just 194,000 jobs in September, falling well short of consensus economist estimates of 500,000 jobs. The U.S. unemployment rate fell to 4.8% from 5.2%, beating economist estimates of 5.1%.

Wage growth continued to accelerate to 4.6%, up from 4.3% in August.

The Labor Department also revised July’s total job growth higher by 38,000 jobs to 1.053 million and August’s job growth higher from 235,000 to 366,000. Economists had been expecting 720,000 job additions in August.

The leisure and hospitality industry led the job creation in September, adding 74,000 positions. Government payrolls dropped by 123,000 positions.

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Pressure On Fed: Jamie Cox, Managing Partner for Harris Financial Group, said the biggest impact of the second straight weak jobs report is that it could cause the Federal Reserve to re-think its starting point for tapering its monthly asset purchases.

“There are lots of positives in the report, like an uptick in average hourly earnings, but not enough to sugar coat the fact the employment picture remains murky with all the covid related cross currents,” Cox said.

Brad McMillan, Chief Investment Officer for Commonwealth Financial Network, said the headline jobs number may not be as bad as it appears at first glance.

“The biggest problem is not that growth has slowed; it is that people are still scared to go back to work. While this is clearly a weak report, then, it looks to be reflecting the recent delta wave more than a slowdown in growth - and as such is less of a problem than it might be,” McMillan said.

Growth Narrative Intact: Richard Saperstein, chief investment officer at Treasury Partners, said the disappointing September jobs number doesn’t actually shift the economic growth narrative.

“While the headline number was much weaker-than-expected, the economy saw decent job growth in the private sector during September as well as a decline in the unemployment rate,” Saperstein said.

Cliff Hodge, Chief Investment Officer for Cornerstone Wealth, said the acceleration in wage growth is a potentially troubling sign that the U.S. could be at risk of stagflation.

“On the bright side the overall unemployment rate is now at a pandemic era low, and this reading provides the Fed some flexibility on tightening. This macro weakness also intensifies the focus on earnings season which is right around the corner,” Hodge said.

RSM economist Joe Brusuelas said there is so much noise in the September jobs report that he doesn't believe the Fed will alter its tapering plans.

“The main takeaway here is that there were so many special one-time factors that occurred during the September sampling period that this should not move the needle over at the Fed or among investors that still expect growth to advance at or above 4% in the second half of the year, which is more than double the long-term growth trend in the economy of 1.8%,” Brusuelas said.