Markets (and the Federal Reserve (Fed)) get a read on the health of the labor market as the September Employment Report is released on Friday.


Friday’s report is expected to show that the economy added 70,000 jobs while the unemployment rate remained steady at 4.4%. While much airtime will be spent dissecting those headline figures, we want to focus on two other aspects of this report: the change in private payrolls (Chart A) and the yearly change in average hourly earnings (Chart B).

While the trend for both of these figures is generally positive, recently the growth in each has begun to moderate. The percent change in private payrolls has been range bound between 1 to 3% since the beginning of the most recent recovery and currently sits around 1.7%. In the past we’ve looked for indications of stress when that figure drops below 1%. In this case, with regards to the growth of private payrolls, the labor market appears to be on relatively solid ground.

The trend for wages is positive on a year-over-year basis, though growth has sat around 2.5% since earlier this year. The lack of inflation can explain away some of the stagnant wage growth. With payrolls expanding and the unemployment rate where it is, one could reasonably argue that the labor market is nearing full employment – in which case we would expect to see wage growth pick up in the coming months.

Chart A

Source: Bloomberg

Chart B

Source: Bloomberg


Date Report Period Survey Prior
Monday, Oct 2: ISM Manufacturing Index Sep 57.5 58.8
PMI Manufacturing Index Sep 53.0
Construction Spending M/M Aug 0.4% -0.6%
Tuesday, Oct 3: Domestic Vehicle Sales Sep 12.5M 12.48M
Total Vehicle Sales Sep 16.6M 16.03M
Wednesday, Oct 4: ADP Employment Report Sep 160K 237K
ISM Non-Manufacturing Index Sep 55.1 55.3
Thursday, Oct 5: Weekly Jobless Claims Sep 30 272K
International Trade Aug -$43.9B -$43.7B
Factory Orders Aug 0.7% -3.3%
Friday, Oct 6: Change in Nonfarm Payrolls Sep 70K 156K
Change in Private Payrolls Sep 55K 165K
Unemployment Rate Sep 4.4% 4.4%
Average Hourly Earnings M/M Sep 0.3% 0.1%
Average Hourly Earnings Y/Y Sep 2.5%
Average Weekly Hours Sep 34.4 34.4
Labor Force Participation Rate Sep 62.9%
Underemployment Rate Sep 8.6%
Source: Bloomberg


Based on shorter-term expectations, the “tactical” allocation within portfolios is equally weighted between bonds and stocks.

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Kevin Caron, CFA, Senior Portfolio Manager

Chad Morganlander, Senior Portfolio Manager

Matthew Battipaglia, Portfolio Manager

Suzanne Ashley, Analyst

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