Strong Jobs Report Sets the Stage for a Holiday Stock Rally

So much for an impending recession! Today’s official jobs report solidly confirmed that the U.S. economy is not on the brink of a recession. Rather, it seems to be in the early innings of a powerful recovery. 

As such, we think this strong data sets the stage for a powerful stock rally in the final three months of the year. 

In fact, I cannot emphasize enough how impressive and important I think this jobs report actually was… 

Many economists and market observers were worried that the U.S. economy was at risk of falling into a recession due to a weakening labor market. After all, the last few jobs reports have been feeble. 

But so many data points in today’s report dispelled those fears. 

Let’s get into it.

The Jobs Report Stand-Outs

From head to toe, September’s jobs report was strong – exceptionally strong: 

• Huge job growth. The U.S. economy added 254,000 jobs last month, much higher than expected and the biggest monthly job growth number since March 2024. 
• Major positive revisions. July and August job growth numbers were revised higher by a very meaningful 74,000. So, the U.S. economy didn’t just add far more jobs than expected in September. Revisions show that the economy added far more jobs than we initially thought in July and August, too. 
• Private sector power. Private payrolls increased by 223,000, far higher than expected and also the biggest monthly job growth number since March 2024. This highlights the fact that this recovery is not just being driven by government hiring. It is a private sector recovery. 
• Falling unemployment. Last month, the unemployment rate fell from 4.2% to 4.1%, marking its second consecutive monthly drop. We find that very interesting because unemployment rates tend not to drop in back-to-back months unless the labor market is in full-on recovery mode. In fact, during the 2008 financial crisis, dot-com crash, and early 1990s recession, the unemployment rate never declined for two straight months until unemployment topped out – in summer 2010, summer 2003, and summer 1992, respectively. Yet… it just did, suggesting the labor market is already in recovery mode. 
• Rising wages. Average hourly earnings rose 4% year-over-year, better than expected and up from the previous month’s 3.9% gain. Real-time estimates for September inflation are around 2.2%. That means that last month, wage growth outpaced inflation yet again – for the sixteenth  straight month. Moreover, using those estimates, real wage growth was 1.8% in September, its highest since March 2021.  

Indeed, this latest report was strong enough to almost entirely dispel most recession fears, replacing them with hopes for a recovery. 

That’s why we believe this data sets the stage for stocks to keep on rallying for the rest of the year.