Stock futures mixed after payrolls disappoint
Stock futures were mixed Friday morning as investors digested a key report on the labor market’s recovery.
Contracts on the S&P 500 ticked fell, reversing course after the index logged a third straight session of gains during Thursday’s trading day. The move to the upside came after Senate leaders said they reached an agreement on raising the government borrowing limit into early December, helping avert a default as soon as this month. The chamber voted Thursday evening to raise the debt limit by $480 billion, and the legislation for the short-term increase heads to the House of Representatives.
With concerns over the government debt ceiling pushed off, investors have fixed their attention toward the latest monthly jobs report from the Labor Department. This report showed another miss on payroll gains after a disappointing August print.
Non-farm payrolls rose by only 194,000 in September versus the 500,000 expected. The unemployment rate fell more than expected to 4.8%, though this positive development came alongside a disappointing drop in the labor force participation rate to 61.6%, versus 61.7% in August. And the size of the civilian labor force actually contracted in September, with the gap between the labor force in February 2020 and last month yawning further to over 3 million.
Average hourly earnings also accelerated to reach a 4.6% year-over-year rate, or the fastest since February, in another print affirming inflationary pressures taking place across the U.S. economy.
“People are more fixated on the jobs created more than anything else. I think the wages are more important for people who are worried about inflation,” Julie Biel, portfolio manager at Kayne Anderson Rudnick, told Yahoo Finance Live on Thursday. “For us, seeing modest wage inflation is a positive because if you think about the U.S. economy, it’s primarily a consumer economy … so it is a positive for the economy longer-term. But it is a negative for profit margins which have been at all-time highs.”
Friday’s jobs report stood in stark contrast to other, stronger-than-expected data on the state of the labor market in the U.S. New weekly jobless claims came in at their second-lowest since March 2020 on Thursday, and ADP’s private payrolls report showed a better-than-expected 568,000 job gains in September earlier this week.
Despite the payrolls miss, the September jobs report may have still been enough to trigger the start of tapering by the Federal Reserve, some economists said. The central bank already signaled last month that it was inclined to remove some of its highly accommodative monetary policies as the recovery made further headway. And Fed Chair Jerome Powell said it would only take a “reasonably good report” for September employment to signal the labor market had reached the Fed’s threshold for tapering.
“There is no other plausible explanation why employers are unable to hire the workers they need: the reason is there is no…