336K New Jobs Nearly Doubled Economists’ Predictions

The September jobs numbers took all the predictions of the economic masters of the universe, lined them up, and then swept them into the nearest brick wall. Putting a new spin on the idea of projections.

The 336,000 jobs was “well above the 12-month average of 267,000,” said Nationwide Chief Economist Kathy Bostjancic in emailed remarks and almost double the 170,000 consensus, according to emailed comments from David Kelly and Stephanie Aliaga at J.P. Morgan Asset & Wealth Management. And then there were the 119,000 additional jobs through data revisions for July and August.

It’s been time for a while to jump off the daily news cycle. Data jitter and the wild swings of forces having at the economy and investment make it impossible to know what will happen. But it does mean that planning might well include scenarios where interest rates go even higher than they have been.

“The jump in employment, the extremely low level of unemployment claims, and the rise in job openings keep alive the possibility of the Fed raising rates one more time this year,” Bostjancic said. “Moreover, it underscores that they will be in no hurry to cut rates – higher rates for longer.”

Jobs and the potential of employer demand to drive wages up are a constant preoccupation for the Federal Reserve because of the effect they assume competition to hire workers will have on inflation.

There is some data to take the edge of this possibility, because “beneath the headline numbers the more important message from the jobs report is that the economy still appears able to absorb strong job gains without generating higher wage inflation,” wrote J.P. Morgan’s Kelly and Aliaga. “Because of this, it is still a close call as to whether the Fed will feel the need to raise short-term rates one last time in November or December.”

And the household survey showed only 86,000 added jobs, as Charlie Ripley, senior investment strategist for Allianz Investment Management, pointed out via email. The current conditions remain muddy.

“Odds of a rate hike in November rose after the latest jobs report, now slightly above a 30% chance,” said LPL Financial Chief Economist Jeffrey Roach in an email. “Given the strength in hiring last month, investors and policy makers will put even more emphasis on next week’s CPI release.”