This NFP was a Goldilocks report. The break-even payroll rate has dropped because net immigration has turned negative, which means the real signal to watch is wages. Wages did not pick up, which is comforting for the Fed. Bonds rallied, October is now at 20% priced, and the market may start to price out December.

September NFP: Oct 2, 8:30 AM ET. Expected: ~100K jobs (Aug: 162K) Unemployment: 4.2% (Aug: 4.1%) Avg hourly earnings in Aug: +0.3% m/m, +3.1% y/y With the Fed on inflation, wages may move markets as much as the headline.

Strong NFP report increased the SOFR curve 3.25-5.5 bps out to Dec27. Moved rate hike odds up ~14% for September and 15-20% higher expected FF across the curve. FF Futures/SOFR are now putting the odds of a 25 bps hike at around 2-1 The FOMC blackout starts tomorrow, and this is the last big datapoint before the meeting so it's likely the derivative markets will be strongly forecasting a rate hike at meeting time. The FOMC rarely surprises the market at a regularly scheduled meeting. We have detailed data on "surprises" because the difference between the FOMC action and the futures expected rate is used as an identification tool for academic papers studying the effect of policy rate changes on the economy. One would have to go back to Dec 1994 to find a time when the market expected a rate increase at a regular scheduled meeting and the FOMC did not raise rates.

Three-month average NFP is now at 51,000, down from 71,000 before the print, with the 12-month at 41,000. Solid but unspectacular. The real story: all other sectors have lost jobs since the end of 2022, with three sectors doing all the work. Striking against the GDP backdrop.