September’s jobs report changes everything

‘Path to a soft landing’
September’s blockbuster jobs report “gives the Federal Reserve a fairly open glide path to a soft landing,” writes CNBC’s Jeff Cox. Despite that optimistic outlook, the fact that the jobs report managed to defy the calculations of so many Wall Street analysts — and perhaps even the U.S. Federal Reserve — raises questions about what we can truly know about the economy.

Reversing losses
Major U.S. indexes rose Friday, erasing the previous four days’ of losses to close the week higher. The yield on the U.S. 10-year Treasury added around 12 basis points, almost hitting 4%. The pan-European Stoxx 600 index gained 0.44%. French videogame publisher Ubisoft surged over 30% after Tencent and Ubisoft’s founding Guillemot family were reported to be considering a buyout of the company.

EU tariffs on Chinese EVs
The European Commission voted on Friday to impose tariffs on Chinese battery electric vehicles imported into the European Union. The Commission said in June that the Chinese EV industry “benefits from unfair subsidization.” But not everyone supports the measure. Germany’s against the decision, and Mercedes-Benz, BMW and Volkswagen have criticized it.

[PRO] Next up this week
After last week’s surprising jobs report, investors will be awaiting the consumer and producer price index reports for September, coming out on Thursday and Friday respectively. But one analyst thinks the inflation report will matter less than the jobs report. The Fed’s minutes will also be released this week, giving an insight into its jumbo rate cut.

Oh, to be a fly on the wall when the U.S. Labor Department arrived at the final tally for September’s jobs number. I imagine a harried official yelling, “Did someone use PRODUCT instead of SUM in Excel?”

Because it seems only a confusion between the multiplication and addition functions could lead us to the completely unexpected number of 254,000 nonfarm payrolls added in September — around 70% higher than what economists had expected.

By comparison, August’s number was only 12% off the estimate, and even July’s hugely disappointing report, which sparked the sell-off in early August, was “merely” 37% lower than forecast.

It’s likely the Fed was also caught off guard. “It is doubtful” the Fed would have slashed rates by half a percentage point “if it had known this report would be so strong,” said David Royal, chief financial and investment officer at financial services firm Thrivent.

Indeed, the report demolished expectations so thoroughly it calls into question assumptions and models about the economy. That’s perhaps why stocks rose only tentatively on its release.

Still, those numbers were big enough they erased the losses of the previous four trading days. For the week, S&P rose 0.22%, the Dow ticked up 0.09% and the Nasdaq increased 0.1% — a huge jump, considering it was down more than 1% at Thursday’s close.

Perhaps markets’ measured response on Friday was muted because the jobs report, while reaffirming a recession is a ghost banished for now, almost guarantees the Fed will reduce rates by a quarter point — at most — during its November meeting.

There’s no need to be a fly on the wall when the Fed discusses rates. They release minutes of their meeting, anyway. Jobs data is so crucial to the economy now I’d continue buzzing around the Labor Department’s office.

– CNBC’s Jeff Cox, Alex Harring and Lisa Kailai Han contributed to this story.