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Well, the US economy added 254,000 jobs in September, far exceeding the expectations of 150,000, and most economists estimates for that matter. Unemployment also unexpectedly ticking lower, all of this reflecting a stronger picture of the jobs market than Wall Street expected. But the data not coming is too much of a surprise for our next guest, Jeffrey Senior US Economist, Thomas Simons, who had some of the most bullish estimates on the street. It's good to see you, Thomas. Taking a little victory lap for what it's worth on, uh, on these numbers.

Likewise. Good to be here.

As an economist, you don't often get too many chances to do that. So I'm going to milk this one for as much as I can.

So what did you see coming up to this report that you think other folks weren't seeing?

So it's pretty in the weeds, unfortunately. Um, you know, this is true geekery level of getting down into the details. But essentially, you know, the seasonal adjustment is very significant in September, right? Teachers go home for the summer, they all get hired back for the fall. Um, there was some anecdotal reports out there that maybe these budgets on, you know, state and local governments are being cut. So maybe they're letting go support staff and aids and ancillary employees. Uh, but the fact of the matter is, you still have, you know, close to a million people coming back to work from from being off. So the seasonals are anticipating all these people coming back. That tries to kind of like push the number down. The seasonals, when they take out jobs in the last several months anyway, have been taking out fewer jobs than they were like pre-pandemic or, um, even in the last couple of years. So it's one of these things where it's like, well, you know, small adjustment there ends up having an outsized impact on the on the headline print. Since that's really just a, you know, kind of the net number of jobs that's gained in the end.

Thomas, the strategist, economist, David Rosenberg, wrote this on X. Just an interesting question. He says, "It's really tough squaring today's red hot payroll survey data with what business contacts told the Fed in the latest Beige Book, namely employers were more selective with their hires, less likely to expand their workforces." Talking about an uncertain economic outlook, wages rose at a modest pace. How do we square these two things?

Well, roughly three quarters of the jobs that were created were in education and healthcare and leisure and hospitality, right? So outside of one of the Fed contacts being perhaps a, you know, major restaurant chain operator or something, I don't know that they would necessarily have eyes on the trends that are fueling that job growth. So you can see in many other areas, like information, um, finance, retail trade, that's where hiring has slowed down sharply. And then of course, you have government hiring on top of it that, you know, looked like it was slowing down in the first half of the year and now seems to be picking back up, have some upward revisions that make the picture look a little bit more, um, you know, more solid. So, uh, yeah, but he's absolutely right that it's very difficult to reconcile the very negative tone of any kind of qualitative data, you know, the surveys, PMIs, um, Beige Book, against the economic data, which is in good shape and in some instances is getting revised higher and and looking good, yeah.

I mean, it's not unusual necessarily to have surveys and and more hard data to not match up. Something else that stood out to me in the report, which again is a little bit in the weeds here, is the response rate. That is the percentage of companies who answered when the government said, "How many people did you hire?" was around 62%, which is the lowest we've seen in a September since 2002.

Absolutely.

Okay.

So usually when you get the revisions, that goes up to something like 90%.

Yeah, eventually, yeah.

So what does that mean? How likely is it that the number will stay at 254,000?

Oh, it almost certainly won't stay at 254,000. To be honest, I'm not 100% sure that means it's necessarily going to be revised up or down. It's just that, you know, as they get more of the detail in, it changes the picture. Uh, recently, again, you know, the revisions tend to be kind of a momentum thing, right? So if you're getting downside revisions, you're more likely to get another downward revision the next month. Uh,

Well, we just got some upward revisions, yeah.

That's the thing, right? We kind of have pivoted on that front. So, yeah, I mean, it really does look like, if you buy into that, there is a good sign that the labor market slowed, but it's still, you know, cooking along. It's not, you know, getting into some sort of reinforcing cycle to the downside, which is what often happens when layoffs start up. Um, but layoffs aren't really a thing right now. I mean, I don't want to say that dismissively, but, uh, the quantity of layoffs is still relatively low. The hiring rate has slowed down, sure, but, you know, then that leaves you with a decent net job gain. So, uh, to the point of the revisions, uh, the response rate, that's pretty low, obviously, but it's been trending lower for quite a long time now. And I don't know that there's necessarily been a strong correlation between where the survey response rate is versus whether or not that means you get up and down revisions. Uh, so, yeah, I mean, it's, uh, it is quite low. Um, it may be indicative of some sort of, you know, disruptions from weather or or whatnot, because that oftentimes is why you'd have a business not respond. Um, but, yeah, I was more worried about that for October than for, uh, for September. So

Right, yes.

On October, I did see, um, some economists saying, "Look out for a much weaker print." And among the reasons, they said Boeing, they said Hurricane Idalia. Is that what you're looking for?

Yes. Uh, I think it's a little bit dangerous to go too hard into the the weakness story. Um, Hurricane Idalia, obviously, looks like the damage is quite extensive and still ongoing. Um, but a lot of relatively rural populations hit by this. So it's not like when you had, for instance, Hurricane Harvey in Houston, where it was, I think, the fifth largest metropolitan area in the country, something like that. Then you can have big swings in payroll data. Um, but I don't think that we're necessarily going to see the weather effect be that significant, but the work stoppages for sure, you know, I mean, like Boeing, if the strike, um, you know, extends through the survey period, that would be fairly substantial. Doesn't look like we're going to lose the dock workers, but, I mean, they've been now, um, you know, off the lines for close to a week, and everybody's expectations for this seems to be that for every day they're off, it's another week of backlogs and bottlenecks. So, um, that could have, that could result in some slack elsewhere, you know, people waiting for shipments and and stuff like that. But given, you know, to your discussion earlier that this is, you know, now resolved and wasn't that long, that impact is probably pretty small. I want to ask about the Fed before we let you go. Is there a possibility that you could get the Fed pausing or not cutting at all in November?

Right. Yes. Yeah.

I don't think so in November. I feel like they've, you know, obviously, Powell always says that there's no prejudgment on moves or whatever, but the way that they've signaled things, it would be very inconsistent for them to pull back this quickly after having just gone 50 basis points. So it really would call in. I think it would be a bad look, right? It would be a credibility negative event. Um, where I do think there's possibility they may pause is actually December, right? Because we'll be through the election, all that stuff. Um, we could see continued strong data. Um, and by then, they would have had enough accumulated strong data to show that there was a big, you know, acceleration in activity from the summer to the Q3 and Q4. Um, and that might lead them to be a little bit slower on the rate cut cycle.

Thomas, always great to have you on the show. Thanks for joining us.

Thank you. Appreciate it.