Dow rises ahead of a consequential jobs report

Ahead of another consequential jobs report, stock futures remained relatively unchanged.

Investors are likely hoping for a subdued jobs report. That could mean that the Fed has less room to keep hiking rates by historic levels in its fight against inflation.

Dow futures were up 25 points, or 0.1%.

S&P 500 futures fell 0.1%.

Nasdaq futures fell 0.4%.

US oil rose 0.9% to $89 a barrel. Average US gas prices rose to $3.89 a gallon.

When the Bureau of Labor Statistics releases its latest monthly jobs report at 8:30 am ET, all eyes will be on whether the labor market is showing signs of loosening up – one of many crucial factors that will help the Federal Reserve determine its next steps in its fight against decades-high inflation.

The US economy is forecast to have added 250,000 jobs in September, which would be the lowest monthly jobs gain since December 2020. The unemployment rate is expected to hold steady at 3.7%, according to Refinitiv estimates.

August jobs data already indicated that the historically tight labor market has loosened by a notch. The jobs report for that month found that America added 315,000 positions, a much lower level than the 512,000 average job gains over the past 12 months. The number of open positions also fell, sinking by 1.1 million, the largest monthly decline outside of the pandemic, according to the Jobs Openings and Labor Turnover Survey released on Tuesday.

Read more

If Friday’s headline number comes in above 250K, Wall Street may read that as a sign the Fed is going to have to keep raising interest rates, adding to already-significant strain across financial markets.

If it comes in well below 250K, you might see some renewed optimism that the Fed’s policies are starting to have their intended effect, and it may not need to keep inflicting pain on the economy.

It’s hard to overstate just how delicate the situation is. In fact, just today the IMF’s managing director, Kristalina Georgieva, described the world as being in a period of “historic fragility” after a torrent of economic shocks over the last two-and-a-half years, from the pandemic to the war in Ukraine.

That’s why the Fed’s decisions are being so closely scrutinized. When the Fed raises rates as aggressively as it has in the past several months, it creates painful ripple effects around the globe, pushing the US dollar’s value up and forcing other central banks to raise their own rates as well. All of which could tip the world’s biggest economies into a recession, the UN has warned.

Investors and economists will be hyper-focused on wages in today's jobs report.

The Fed and others would be happy to see wage growth slow down. Less money in our wallets leaves us with less spending power, and when we stop buying things, prices go down. In theory, anyway. That’s just one part of the large and complicated inflation puzzle.

In the last jobs report, wages were up 5.2% over the last 12 months. That’s historically high (woo!) but it doesn’t keep up with inflation, which is hovering around 8% year over year (boo!).

Wages pose a particular conundrum for the Fed. It wants us to shop just a little less – but not a lot less. Unfortunately, there’s no magic formula for how much wages need to go down to make a dent.

The risk of wages going down too much, too quickly raises the risk of falling into stagflation, which is as unpleasant as it sounds. Stagflation – a portmanteau of stagnation and inflation – is when economic activity slows while prices continue rising.

When the government releases its latest monthly jobs report on Friday, all eyes will be searching for signs that the labor market is loosening up — a key factor weighing on the Federal Reserve as it figures out its next steps to fight inflation.

Economists expect the headline figure to show 250,000 jobs were added in last month. That would be the smallest monthly gain in nearly two years, and well below the average of more than 510,000 for the past 12 months.

Seems counter-intuitive, but the Fed (and much of Wall Street) is actually rooting for that number to go down.

Here’s the thing: Before the pandemic and its whiplash-inducing economic rebound, the US economy averaged about 200,000 new jobs each month.

So, while things are slowing down, they’re still pretty robust relative to those pre-pandemic normal times. And that’s part of what is keeping inflation elevated.

Investors are holding their breath this morning as they await the release of the Bureau of Labor Statistics' latest monthly jobs report.

All eyes will be on whether the labor market is showing signs of loosening up — one of the most crucial factors that will help the Federal Reserve determine its next steps in the fight against decades-high inflation.

The US economy is expected to have added 250,000 jobs in September, which would be the lowest monthly jobs gain since December 2020, according to Refinitiv estimates.

If numbers come in as estimates suggest, investors will likely be very happy. A weakening labor market will exert downward pressure on wages and inflation. That means the Fed's policy is working and that it might pivot away from aggressive interest rate hikes.

August jobs data already indicated that the historically tight labor market has loosened by a notch, reports my colleague Alicia Wallace. The jobs report for that month found that America added 315,000 positions, a much lower level than the 512,000 average monthly gain over the past 12 months.

But while the hotly anticipated headline jobs number is falling, it's still robust, BLS data shows. The monthly average prior to the pandemic was around 200,000.