When the monthly jobs numbers are released, what counts as "good" can vary depending on where things stand in the economy. That's especially true at this precarious moment.
Why it matters: As we await September jobs data, set to be published Friday morning, it's worth asking what a dream jobs report would even look like — the kinds of numbers that would give the Fed comfort that inflation is coming down but not suggest masses of people will soon be out of work.
Driving the news: Forecasters expect the numbers, due out at 8:30am EDT, to show a deceleration in job creation (250,000 positions added, down from 315,000 in August) and the unemployment rate holding steady at 3.7%
- Other labor market indicators this week have suggested the labor market is starting to cool a little, while remaining basically healthy. Thursday morning, the Labor Department said jobless claims surged to 219,000 last week, up from 190,000.
- Meanwhile, August job openings data plunged.
State of play: In the ideal scenario for jobs, the number of people in the labor force rises, boosting the supply side of the economy — even if that means a rise in unemployment, as not all of those would-be workers find jobs.
- Combined with the recent drop in job openings, that would be a sign the labor market was coming into better balance, with the number of people looking for work and the number of jobs available in better alignment.
What they're saying: "The most benign Goldilocks scenario for a Fed now looking for a cooler bowl of porridge is for the unemployment rate to rise purely on a sharp increase in participation in the labor force," Diane Swonk, chief economist at KPMG, tells Axios.
The report will also include data on average hourly earnings, an important signal of whether wage pressure is abating. Analysts expect a 0.3% rise, which would translate into a 5.1% rise in wages over the past year.
- In the dream scenario — again, one in which there is disinflation but no severe recession — that would come down a couple of ticks, perhaps to 0.1%, former Pimco chief economist Paul McCulley tells Axios.
- McCulley says he also would hope to see net job creation in the 200,000 range, a significant drop from the 378,000 average in the last three months.
The bottom line: The jobs numbers always matter, but this month they matter most for what they indicate about the likelihood of a soft landing.
