On the September Jobs Report

Another not-“solid” jobs report – with the number of unemployed persons up by half a million since May, and the second uptick in the unemployment rate in three months. The good news is that this means labor force dropouts are coming back – which means the unemployment rate isn’t as low as it looks, and there remains considerable slack in the labor market. Yellen herself acknowledges this, yet the Fed seems bound and determined to hike in December, which we feel strongly would be an error. It seems it will take a big negative shock – maybe a Brexit-like election surprise? – to stay the FOMC’s hand. We’re going to have to bow to what seems inevitable, but with a 63% market-implied probability for a December hike, we’ll “take the under.” It’s a close call.