QI TAKEAWAY — Despite a disappointing payroll headline, bullish unemployment trends should force a November taper announcement. Zooming out, the acceleration in wage pressures in the production and distribution chain could be heralding an inflation regime shift. In the near term, a steepener trade would capture that risk.
- The unemployed have fallen by 1.8 million in the last three months, a decline that compares solely to 2020’s post-pandemic reopening; permanent job losers are down by 936,000 and account for more than half the improvement, a confidence vote for a sustainable expansion
- While September’s gain of 194,000 jobs disappointed, education headcounts fell while total private employment rose by 317,000; though 4.8 million jobs remain to be recovered, the yield curve steepened, signaling the Fed should be on track to launch its taper in November
- Wages for production/distribution workers have seen an 8.4% annualized gain in the six months ended September, the highest since the early 1980s; small businesses are also feeling pressure, per Paychex, seeing three-month annualized gains between 5.2% and 5.4%