Friday we learned that nonfarm payrolls showed 110,000 jobs were created in the month of September. This report does not sound like a recession to me. However, the best news from Friday was that the supposed 4000 lost jobs in August were actually 89,000 new jobs. These job numbers led to headlines such as : '"Nevermind--US job growth firm after revisions", "Job Growth Looks Rosier, Easing Recession Fears", or "Jobs: A September Shocker." These numbers certainly are encouraging and, as noted in the above stories, have some observers reevaluating their economic forecasts. I went to intrade and looked at the contract for there being a recession next year. Here is the graph:
The wisdom of the markets now say there is now less than a 50 probability of a recession next year. I really hope these jobs numbers are a turning point for the US economy, but for reasons discussed in this blog before I will not surprised if this good news is fleeting.
And from the Big Picture, Barry Ritholtz keeps us sober by reminding that "[a]ny report under approximately ~150k month (subject to revisions) is weak. It means that job creation is failing to keep up with population growth."
Below is a graph from the Cleveland Fed showing the market's expectation for the outcome of the October FOMC meeting. This graph is based on options on federal fund futures. Note that as of Friday it shows a greater than 50% of the federal funds rate staying at 4.75%.