WASHINGTON
The U.S. economy added only 29,000 non-farm jobs in September, falling far short of the 90,000 jobs analysts expected. The miss triggered a 0.7 percent rally in the S&P 500 on Oct. 2, with the Nasdaq-100 climbing 1 percent as investors repriced the probability of a Federal Reserve rate hike.
The labor market deterioration extends beyond September. July and August payroll figures were revised lower, with July now showing a 10,000 job contraction. That marks the fourth month in the past 12 with negative employment growth—a pattern that signals sustained cooling rather than a temporary soft patch.
For equity investors, the calculus is straightforward: weak job growth reduces pressure on the Fed to raise rates. High borrowing costs have weighed on growth stocks and compressed valuations. Lower rates would ease that headwind. The Nasdaq-100, up 24 percent year to date, is leveraged directly to this repricing.
The risk: if the economy stalls sharply enough to force aggressive Fed cuts to stave off recession, earnings forecasts will deteriorate and the S&P 500 corrects. That scenario remains plausible if labor data continues to deteriorate.
For now, the data supports the soft-landing thesis—slower hiring without outright recession. Watch October and November payroll reports closely. If they show similar weakness, the Fed's December rate decision becomes critical for equities.
