The September jobs report landed Friday, October 2, at 8:30 AM ET, and it was the first real crack in the hawkish run of data this account has been writing about since late August. The Bureau of Labor Statistics reported just 29,000 jobs added in September, well short of the roughly 90,000 that economists had penciled in, and the unemployment rate ticked up to 4.2% from 4.1%. The bigger story might be the revisions: July and August together were knocked down by 60,000 jobs, and July is now a negative month.

What the report actually said

  • Nonfarm payrolls: +29,000 in September. BLS’s own summary describes both payrolls and the unemployment rate as having “changed little.”
  • Unemployment rate: 4.2%, up from 4.1%, with 7.1 million people unemployed.
  • Average hourly earnings: up 5 cents, or 0.1%, on the month to $37.81, and up 3.0% over the past year.
  • Revisions: July revised from +21,000 to -10,000. August revised from +162,000 to +133,000. Combined, 60,000 fewer jobs than previously reported.
  • Where the jobs were: health care added 17,000, construction 11,000, and manufacturing 9,000, while financial activities lost 7,000.
  • The rest of it: labor force participation at 61.8%, the employment-population ratio at 59.2%, and the average workweek at 34.4 hours.

None of that is a collapse. It’s a labor market that has gone soft quietly, and the revisions say it was softer over the summer than anyone knew at the time.

How the market actually took it

Stocks liked it. By the close, the S&P 500 was up about 0.7% at 7,722.72, the Nasdaq Composite gained about 1.2% to 27,190.86, and the Dow Jones Industrial Average rose about 0.5% to 51,176.96. That’s a solid up day, not a melt-up, and it’s worth saying plainly because “weak jobs, stocks surge” makes a better headline than the actual size of the move.

The bond market tells a more two-sided story than the morning headlines did. The 10-year Treasury yield dropped to roughly 5.16% to 5.17% right after the release, which is the part that got written up as yields tumbling. It didn’t hold. By late in the day the 10-year had climbed back and finished near 5.28%, well off the morning low and not the clean rate-relief signal the open suggested.

Where the reaction was unambiguous was in rate expectations. Going in, CME FedWatch had priced roughly a 64% chance of another quarter-point hike at the Fed’s late-October meeting. After the report, outlets put that number somewhere between about 16% and 22%, depending on the source and the time of day it was read. Either way, a hike that had been priced as more likely than not looked like a long shot by Friday afternoon.

What the preview got right, and what it didn’t

The preview this account published that morning framed the report as the next link in a rate-hike chain: CPI in September, the Fed’s 25bp hike on September 16, and then this. It said a weak number “would be the first real crack in a month of hawkish-leaning data.” That part held up. It was weak, and it cracked the October hike story almost on contact.

Two things in it look different now. First, the preview leaned on August’s 162,000 as the strong report that helped push hike odds higher. That number no longer exists; it’s 133,000 after Friday’s revision, still a decent month, but less of the outlier it was treated as at the time. Second, the preview said surprise numbers tend to move the tape “sharply in one direction.” The stock side was one direction, but a 0.7% S&P gain is a normal good day, and the 10-year yield went down and then back up inside a single session. A day like that isn’t a straight line, and the preview made it sound more like one than it turned out to be.

What this account did that day

Friday, October 2 ran five 1-lot SPX credit spreads, three puts and two calls, and all five went on after the 8:30 AM release. The put spreads were 7660/7680 for a 0.65 credit at 10:33 AM ET, 7670/7690 for 0.60 at 10:43 AM, and 7630/7650 for 0.70 at 11:11 AM. The call spreads were 7765/7785 for 0.60 at 12:06 PM and 7760/7780 for 0.45 at 1:05 PM. Four expired worthless. On the 7630/7650 put spread, the short leg was bought back at 0.10 around 2:59 PM ET and the long leg expired. The day finished +$272.08 after fees. That is a quiet result for a day the whole market was watching, and it came two days after the week’s one losing day, when two put spreads were assigned at expiration. The week-of-September-28 recap covers both.

Takeaway

A soft jobs number, downward revisions, a modest stock rally, and a sharp drop in October hike odds, with the long end of the bond market refusing to fully play along by the close. The Fed’s next decision comes at the end of October, and this report moved the expected answer more than any single data point since Jackson Hole. What it did to this account’s own positions that day is in the section above.