The markets don’t believe the bad jobs report. Here’s why.

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The stock market doesn’t believe September’s disappointing jobs report, and neither do you.

Yes, the US economy only created 194,000 jobs last month, well below the 500,000 predicted by economists. This is the kind of number that under normal circumstances should lower bond yields and stock prices.

This is not what is happening, however. The

Dow Jones Industrial Average
increased by 41.26 points, or 0.1%, while the

S&P 500
rose 0.2%. The

Nasdaq Composite
is little changed. The most interesting move from a market perspective is the 10-year yield, which initially declined but is now up 0.036 percentage point to 1.607%.

In fact, you could argue that yields are acting as if the jobs report is more complicated than the headline figure suggests, and nothing has changed to stop the Federal Reserve from announcing a cut in its purchases of ‘obligations at its November meeting.

“The number of jobs seems more random and few expect the Fed to reverse the trend next month,” writes Andrew Brenner of NatAlliance Securities.

Which give? First of all, while the 194,000 jobs created were disappointing, the September employment report is also only a first draft which will be revised in the coming months, just like July and August, and these two months saw additional jobs created, with an increase in July. 38,000 to 1.053 million, and August increasing from 131,000 to 366,000. So, even with a disappointing September, the third quarter saw 1.613 million jobs created, or more than 500,000 per month. It’s not too ugly.

For its part, the unemployment rate, which fell to 4.8%, was certainly not disappointing, even though it was largely the result of a shrinking workforce. . The household survey, which is used to calculate the unemployment rate, showed an increase of 526,000 jobs, not too bad either.

Ultimately, focusing solely on payroll numbers tells investors little about the true strength of the economy, and that is unlikely to change the Federal Reserve’s calculations. “Considering all the mitigating factors, we do not expect a delay in reduction due to today’s report,” writes Jefferies economist Aneta Markowska.

Write to Ben Levisohn at [email protected]