The U.S. Labor Department announced that nonfarm payrolls grew by 254,000 in September, up from a revised 159,000 in August and significantly better than the 150,000 Dow Jones consensus forecast. Louis Navellier, founder and chief executive of Navellier & Associates said, “The nonfarm payroll number blew away even the most bullish estimates.”
The data for August was revised higher to 159,000, an encouraging sign after four straight months of downward revisions. Navellier also noted that the unemployment rate dropped to 4.1% from 4.2%.
Jeffrey Roach, chief economist for LPL Financial, said, “This solid report increases the odds that the economy will continue to grow above trend in the next quarter. Our base case is the Fed will cut by a quarter point at the next few meetings.
Roach pointed out that hours worked edged down to 34.2 in September and were trending below the pre-pandemic average, which he said is an essential metric for growth and productivity forecasts. Further, this solid payroll report validates that a potential half-point reduction in the Federal Funds Rate was completely unwarranted.
The Fed funds futures market is responding accordingly,” he added. The number of those holding multiple jobs rose to 5.3%. The last time this ratio was higher was in early 2009, during the Great Financial Crisis.
Nonfarm payrolls exceed expectations
Chris Versace commented positively on the recent economic news, including a tentative deal ending a port strike and a strong September employment report. “While we are enjoying the rebound effect on stocks closing out the week, we must also consider it will keep the market’s valuation stretched,” he said. Versace discussed the market’s current valuation metrics, emphasizing the importance of using multiple factors besides the simple price-to-earnings ratio.
He pointed to the dividend yield, the amount of money a company pays shareholders divided by its current stock price. “Of the just over 500 constituents in the S&P 500, more than 400 pay dividends,” he said. Versace also noted the mismatch between an expensive P/E multiple (higher) and a low dividend yield.
“Although the S&P 500’s dividend yield has been slightly higher recently, it’s still at a very low historical level,” he said. “This adds to the view that the market is stretched at current levels and supports our near-term view to remain cautious.”
