Strong US Jobs Report Adds Fuel To Economic Growth Rebound
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Cliff-Notes:
- September’s nonfarm payrolls significantly beat expectations, with 254,000 jobs added, a 3-sigma beat above the median estimate of 150,000. This is the largest beat since December and signals the labor market's ongoing robustness.
- With back-to-back upward payroll revisions and economic data surprises, the US economy shows resilience. The ISM Services PMI and ADP Private Employment also exceeded expectations, suggesting sustained growth despite geopolitical risks.
- As the global economy strengthens and monetary easing continues, bitcoin is trending upward, now at $62.3k. The favorable macro environment, including rising liquidity, supports bitcoin's cyclical strength heading into the election.
Friday's nonfarm payrolls report for September came in massively above expectations. The US economy added 254,000 new jobs last month, 104k more jobs than the 150k median analyst estimate. For context, this is a 3-sigma beat, meaning the actual job growth last month was 3 standard deviations above the average estimate. Needless to say, the labor market is still very robust:
This is the largest beat since last December, where job gains were 115k higher than analyst estimates. NFP missed expectations by a huge margin in March, and progressively got better over the summer, to the point that NFP is now beating expectations. During economic slowdown, you get more data misses than beats, and during economic expansion, you get more data beats than misses—this decline in the size of misses capped off with today's huge beat in September adds fuel to the narrative that the US is exiting a growth slowdown into a growth rebound.
One jobs report is not enough to draw this conclusion, we will have to see if this trend holds over the next several months. Nevertheless, it is an encouraging sign as the Fed begins its rate-cutting cycle that the labor market is supported rather than swiftly deteriorating:
Additionally, the last 2 payroll reports were revised higher after the fact rather than lower—the strength of the labor market is now being underestimated rather than overestimated. This is another strong sign that the condition of the US labor market remains strong, with hiring activity persisting at a steady pace and layoffs moderating:
Also included in the report were average hourly earnings rising 4% compared to last September, higher than the expectation of wage growth falling from 3.9% to 3.8%. The unemployment rate also fell from 4.2% to 4.1%—unrounded, the unemployment rate in September was 4.051%, or only 0.1 point away from being rounded down to 4%. A deceleration in the unemployment rate is not something that happens when a recession is right around the corner. This trend must persist to declare victory, but recession risk for Q4 of this year is low given current data:
It doesn't stop there. We received even more data this week that suggests a growth rebound is underway.
The ISM Services PMI for the month of September came in better than expected, with the prices and new order components of the survey rising into expansion territory. Employment is still worse than last month due to a moderating pace of new hires rather than an acceleration in layoffs. As I said, current data shows a labor market with steady hiring activity and moderating layoffs. The consumer is still strong as activity in the services sector remains robust.
ADP Private Employment also rose 143,000 versus the 125,000 estimate. Given that the services sector comprises over 75% of US GDP, this rapid expansion of activity in ISM services suggests a strong and robust underlying US economy:
The Citigroup Economic Surprise Index has risen above 0 into positive territory for the first time since May—meaning better-than-expected economic data is now more frequent than worse-than-expected economic data. This has also been accompanied by a 30-bps rise in the 10-year US Treasury note yield, which is a proxy for growth and inflation expectations.
Growth and inflation expectations are on the rise thanks to robust, better-than-expected economic data paired with the Fed's jumbo 50-bps rate cut:
The 10-year US Treasury note yield is up a whopping 32 basis points since the Fed cut rates on September 18th. While very supportive of US economic growth, the market is also pricing in inflation re-acceleration risk that comes along with the rebound in growth:
Crude oil is climbing thanks to rising global demand and escalating tensions in the Middle East, with the November and December futures contracts for WTI and Brent crude oil trading at 74.5 and 78.1 respectively:
The Fed is easing into a strong economy with stocks, gold, and bitcoin at or hovering around all-time highs. Bitcoin is still ~15% off of its highs, but it's now trending higher after its 6-month consolidation period. With global liquidity and global money supply accelerating, bitcoin is now setting higher lows after an extended redistribution period of lower highs. Now at $62.3k, this constructive pattern for bitcoin is likely to continue thanks to the most favorable macro backdrop it has had since 2020 paired with cyclical strength BTC usually exhibits during the month of October:
There's plenty of worry to go around, between recession fears and global tension rising in the Middle East. Gold is performing its historical role as a flight to safety, one which bitcoin doesn't serve at the moment unfortunately as it's still tightly correlated with risk and trades as a high-beta derivative of the Nasdaq. With recession fears swiftly abating and Middle East escalation necessitating further monetary easing as a second-order effect, the final hurdle for bitcoin to jump this year will be the US election coming up in just 32 days.
The uncertainty surrounding the election will likely cap bitcoin's upside—once that event is resolved, the favorable macro backdrop, supported and rebounding growth environment, and declining US Treasury yields will continue moving investors out on the risk curve into stocks, corporate bonds, and bitcoin.
While there may be continued uneasiness in asset prices during October thanks to the coming election and geopolitical escalation, don't fade the global easing cycle that is well underway and slated to continue well into 2025.
In other news...
The United States added $354 billion to the national debt in just one week to kick off the first quarter of the fiscal year:
Today's report may have been about the United States' growth rebound, but remember that this growth is only enabled by accelerating growth of public debt, and nothing more. Here's the Federal Deficit as a % of GDP, to help illustrate this:
Take it easy,
Joe Consorti
Theya is the world's simplest Bitcoin self-custody solution. With our modular multi-sig vaults, you decide how to hold your keys.
Whether you want all your keys offline, shared custody with trusted contacts, or robust mobile vaults across multiple iPhones, it's Your Keys, Your Bitcoin.
Download Theya on the App Store.