The S&P 500 and Dow Jones Industrial Average posted gains for Friday with both indexes finishing the Oct. 2 week higher. For the week, the S&P 500 gained 1.02%. The Dow Jones Industrial Average posted a gain of 0.97% for the week led by Intel (INTC, Financial), up 5.90%.
Surprisingly, October’s jobs report showed that companies added only 142,000 jobs in September, a substantially lower increase than economists had expected for the month. Economists had predicted job expansion to be in the range of 180,000 to 235,000 jobs. The August number was also revised down. According to the revised report, nonfarm payroll jobs increased by only 136,000 in August, a decrease of 37,000.
Given the tightened expansion over the past two months, it seems job growth rates are contracting as the unemployment rate stabilizes at 5.1%. With the unemployment rate at 5.1%, unchanged from the previous month, it seems employment may be reaching its capacity at the current level. The Federal Reserve has been dovish in its monetary policy decisions weighing both maximum employment and price stability; however, it seems both may not find equilibrium with payroll job expansion now slowing substantially.
Global market developments continue to strengthen the dollar, while oil prices at $40 make it hard to see price stability improving in the near-term. Both of these effects showed in the jobs report sector breakdown, with goods-producing companies slowing the pace of jobs growth substantially. Goods-producing nonfarm payrolls decreased in September, down 13,000 from the previous month. Manufacturing and mining, which includes energy, posted the greatest declines with manufacturing payroll jobs down 9,000, while mining sector jobs decreased by 12,000.
Given the current market conditions, it appears job growth expansion may be trending significantly lower with the energy sector slowing the pace. In a recent CNBC interview, Michael Dudas of Sterne Agee CRT discussed the mining sector’s challenges and how the Federal Reserve may react to the September jobs report.
