Quick Comments On The September Unemployment Report – Oct 8 2021

The September Unemployment Report was disappointing.  With just 194,000 jobs created the number was well below the consensus of at least 500,000 jobs (average).  September saw government jobs slashed by 123,000 positions. That ate into the private sector which gained 317,000 jobs. The other big number is the percentage of people who are not looking for work or basically the non-participation rate which rose rather dramatically. The unemployment rate did fall to 4.8% thanks to a decline in people looking for work rather than more people employed. Wage gains rose slightly which is a good sign.

For investors, the disappointing numbers today gives the Federal Reserve lots of breathing room before raising interest rates or further cutting liquidity from their balance sheets. The go slow approach is definitely in play.

The stock market should see turmoil at times which will drive spikes in volatility at various times in coming weeks. Overall the unemployment report shows continued job gains, albeit nowhere near the size needed to really get the economy roaring back to pre-pandemic levels. The numbers actually feed well into the Fed’s narrative of taking-it-slow and monitoring changes as they unfold in the economy.

The numbers also mean dip trading is back in vogue as the market should continue to muddle forward with the chance of a major decline off the table as far as employment, rising interest rates or lack of liquidity in the markets is concerned. A different catalyst to the downside will have to emerge to send stocks spiraling lower. Instead all the budget issues, debt ceiling, continually partisan political infighting will continue to plague markets which will open up opportunities in coming weeks for more trades. Keeping an eye on the 10 year Treasury will be worthwhile as rising rates will also create dips in stocks, which again will be opportunities for more profit-making opportunities.

Next week investors get bank earnings. The outlook is overwhelmingly positive for further gains in quarterly earnings in all major banks and a number of regional banks such as Truist Financial Stock (TFC) which I trade regularly. Most analysts believe bank stock prices are expected to dip slightly after earnings and then continue to rise.