Hello, my name is Stephanie Aliaga and I am a research analyst at J.P. Morgan Asset Management, with a message on what you need to know about the October Jobs report and how this factors into the broader mosaic of economic data and Federal Reserve’s expectations right now.

So for starters, the jobs report showed welcome moderation in what has been a very tight post-pandemic labor market. The economy added 150 thousand jobs in October, which came in below expectations and is actually on par with what a stable economy growing at its long run trend rate should see. Backward revisions also took over 100 thousand jobs out of the last two months – which is notable, since last month’s reading blew expectations out of the water. The household survey was particularly weak, and even though this survey is usually more volatile, it showed employment fell by a huge 348 thousand.

Now worker strikes account for some of the weakness this month. The BLS says 33 thousand payrolls were subtracted because of the UAW strike, and the Hollywood strikes are likely dampening motion picture employment, and this will correct itself. But even if you add those jobs back, this report is still a notable departure from the blowout numbers of the last few months. The leisure and hospitality sector has been a huge driver of job gains during this expansion and its hiring pace is now slowing down. Labor force participation rate also ticked down, and so did the average workweek. More sectors saw job declines than usual too, and areas of job growth were pretty limited to healthcare, government and social assistance sectors.

Now it’s important to talk about wages, because that’s what the Fed is most focused on, and wage growth decelerated to 0.2% last month, bringing the annual rate to 4.1% and providing further proof that the economy can still maintain full employment without driving wage inflation higher. A big reason for this is because labor market turnover has slowed down significantly. JOLTS data shows that the quits rate has been stabilizing and layoffs remain at historic lows. Wage growth for people switching jobs, which is usually how workers get a big pay raise, has come all the way down from 8.5% last July, to 5.6% year-over-year in September.

It's a healthy labor market, but things are cooling down and the evidence certainly seems to be mounting against another Fed hike. Markets have responded positively to this report, with stocks rallying and yields declining. And the message for investors? Well, historical data overwhelmingly show that after the peak in short-term yields, returns in both stocks and bonds outperform cash. Waiting on the sidelines comes with an opportunity cost, and market performance this week underscores the need to get invested and stay invested.

Well thank you for listening. For more of our insights on the economy and investing you can check out our mobile app “Insights” by J.P. Morgan Asset Management.

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