Slower hiring, two forces: will rate relief come with resilient retail earnings?
By @engtmk · Research as of 2 October 2026
Wednesday’s spending and PCE analysis asked how long strong consumer spending could last. September’s jobs report makes that question harder to ignore.
Slower wage growth could reduce inflation pressure and the case for higher rates. For retailers, however, less pressure on labour costs cannot replace customer demand. Costco and Target offer two concrete tests of whether sales and earnings can remain resilient as hiring cools.
The investment question is therefore broader than whether bond yields fall after a weak report. It is whether any improvement in the rate outlook arrives alongside durable profits—and whether the price of the shares already assumes that favourable combination.
What changed in the jobs report
BLS’s September Employment Situation release, published on 2 October, reported the following seasonally adjusted figures:
| September measure | Result |
|---|---|
| Net nonfarm payroll change | +29,000 |
| Unemployment rate | 4.2% |
| Private-sector average hourly earnings, monthly | +0.1% |
| Private-sector average hourly earnings, yearly | +3.0% |
| Average private-sector workweek | 34.4 hours, unchanged |
Reuters’ economist poll had forecast 90,000 jobs. The shortfall was 61,000, or about 68% of the forecast. That is the size of the forecast miss, not a 68% decline in employment.
Earlier estimates also changed:
| Month | Previous published estimate | Latest estimate | Revision |
|---|---|---|---|
| July | +21,000, second estimate | −10,000, third estimate | −31,000 |
| August | +162,000, first estimate | +133,000, second estimate | −29,000 |
| Combined | −60,000 |
July’s first estimate was −23,000. Its sequence was therefore −23,000 → +21,000 → −10,000; it did not only ever show growth before this release. The BLS revision table preserves that distinction.
Using the latest available July, August and September figures gives an average of about 51,000 jobs a month: (−10,000 + 133,000 + 29,000) ÷ 3. These estimates remain at different revision stages.
Revisions change the measured picture of past hiring. They are not evidence that 60,000 people lost jobs on the release date.
August spending is the starting point—not September’s answer
BEA’s August release showed spending rising 0.9% in current dollars and 0.6% after inflation. Personal income rose 0.2%, disposable income 0.3%, and real disposable income was flat. The saving rate was 4.1%.
Spending was growing faster than current income. That raises a durability question, but it does not prove that households collectively withdrew from their existing savings stock. A positive saving rate still represents an aggregate saving flow; individual households can behave very differently.
Those are August figures. September’s hiring report is a later signal about the income backdrop, not proof that August’s spending strength has already reversed. A weak hiring flow can coexist with continued spending by people who remain employed. Equally, several months of subdued hiring can eventually affect confidence, hours worked and purchases.
That is why the next spending release matters more than a confident story built from one payroll number.
Match the month before judging purchasing power
September’s 3.0% nominal wage growth should not simply be subtracted from August inflation to produce a supposed September real-wage figure. The periods differ, and an inflation measure needs to match the earnings calculation.
The BLS August real-earnings release already provides a useful warning against oversimplification: real hourly earnings for all private employees fell 0.3% over the year, while real weekly earnings rose 0.3%, reflecting longer average weekly hours.
Hourly purchasing power and weekly purchasing power can move differently. Employment, hours and pay together shape labour income. An average also does not describe every household or measure the raise received by the same worker.
September CPI and real earnings are scheduled for 14 October. Until then, September’s nominal wage figure is not a complete purchasing-power verdict.
How the same report can help costs and hurt sales
The transmission to retail earnings has several steps. None is automatic.
| Channel | Potential support | What could offset it |
|---|---|---|
| Labour costs | Slower wage pressure may ease future hiring or retention costs | Company pay policies, benefits, staffing hours and productivity can differ from national averages |
| Customer demand | Continued employment and improving purchasing power could sustain purchases | Weak hiring, fewer hours or caution could reduce visits or basket size |
| Interest rates | Lower required returns could support share valuations; refinancing may become cheaper | Earnings downgrades or a higher equity risk premium could outweigh the benefit |
| Retail execution | Better productivity and inventory discipline could protect margins | Promotions, markdowns and fixed-cost pressure could consume the savings |
The national average hourly wage is not Costco’s or Target’s wage bill. Slower growth is also different from a fall in wages. Existing pay commitments do not disappear because a macroeconomic release improves.
Likewise, lower market yields do not immediately reduce every borrowing cost. Debt terms, refinancing dates and credit spreads determine the corporate effect. Household relief depends on the type of borrowing and whether lower rates reach it.
Costco: test the membership engine and the sales underneath it
Costco’s fourth-quarter release, issued on 24 September, covers the 16 weeks ended 30 August. It is a baseline from before September’s jobs report.
Comparable sales increased 9.4%, or 6.7% excluding gasoline-price and foreign-exchange changes. Membership fee income reached $1.850 billion, versus $1.724 billion a year earlier. The adjusted sales measure still includes other product-price changes; it is not a pure measure of units sold.
The earlier Costco earnings analysis examined the tariff-refund benefit. Today’s question is whether the underlying sales and membership performance can persist if the household-income backdrop weakens.
A value proposition could attract shoppers seeking to stretch their budgets. That is a plausible offset to weaker demand, not proof of immunity. Customers can choose a retailer more often while buying less per visit or shifting towards less profitable products.
Evidence supporting resilience would include sustained shopping activity, healthy membership renewal and fee income, and margins that hold without relying on exceptional gains. A weaker basket, slowing fee income or rising operating expenses relative to sales would challenge that interpretation. Fee income should also be read alongside membership counts, pricing and renewal disclosures rather than treated as a standalone demand measure.
Target: traffic has to pay for the operating model
Target’s second-quarter release, issued on 19 August for the quarter ended 1 August, reported 3.8% comparable-sales growth, comprising 3.6% traffic growth and a 0.2% increase in average transaction amount.
Its selling, general and administrative expense rate rose to 21.6% from 21.3%. Target attributed the increase partly to higher compensation, including additional field hours and incentive compensation, and capital-project costs, with sales leverage providing an offset.
That is a concrete example of why national wage growth cannot be converted directly into a retailer’s margin forecast. A company can spend more on staffing hours even while economy-wide hourly pay growth slows.
The September Target analysis framed the test as traffic, margins and inventory. That remains useful here: do extra visits produce profitable sales, and is inventory growing sensibly relative to sales after allowing for seasonality?
Resilient traffic accompanied by stable merchandise margins would be stronger evidence than sales maintained through heavier discounts. Rising inventory alongside weakening sales would raise the risk of future markdowns. Reported profit also needs the recurring-earnings check explained in Why headline profit is often the wrong number.
These company baselines cover different periods and business models. They do not establish which share offers better value today.
The market reaction is a snapshot, not an earnings forecast
The early Reuters market-reaction dispatch, displayed as published at 08:48 and updated at 08:51 on 2 October on the Investing.com mirror, reported:
- The US 10-year Treasury yield down 6 basis points to 5.176%.
- S&P 500 futures up 0.9% and Nasdaq futures up 1.0%.
- Gold up about 1%.
The mirror does not identify the timezone beside those timestamps. These are the dispatch’s early-reaction observations, not live quotes, closing prices or necessarily simultaneous ticks.
That pattern is consistent with investors welcoming a less restrictive rate outlook. It does not identify a single cause for every price move or show how COST and TGT earnings will respond. No precise October Fed probability is assumed here.
Valuation and profits can move in opposite directions. In a purely illustrative example, if sustainable earnings per share fell 10% while the price/earnings multiple rose 5%, the implied share value would still fall 5.5%: 0.90 × 1.05 − 1. This is arithmetic, not a forecast for either retailer or an estimate of the effect of today’s yield move.
A more supportive discount rate is valuable only in relation to the cash flows being discounted and the valuation already paid.
Three paths—and the evidence that would distinguish them
Orderly cooling. Hiring moderates, inflation eases and real household spending remains positive. Retailers keep traffic and margins without unusually heavy promotions. This would strengthen the case that reduced rate pressure can coexist with resilient earnings. Matched-month real-income data and company results would be more persuasive than a one-day rally.
Demand erosion. Weak hiring persists, hours or employment deteriorate, and real spending slows. Retailers face weaker baskets, markdowns and poorer absorption of fixed costs. Lower yields could then reflect an earnings problem as well as welcome policy relief. Falling forward profit expectations would challenge an optimistic reading of cheaper financing.
Inflation remains difficult. Wage growth slows but other price pressures persist. The rate benefit fails to arrive while consumers still face purchasing-power pressure. That would weaken the assumption that a soft jobs report is automatically favourable for either retail valuations or sales.
There is a reasonable counterargument to the bearish interpretation: one report is noisy, unemployment was still 4.2%, and slower hiring does not by itself establish a recession or a collapse in existing household income. There is an equally important counterargument to the bullish interpretation: stable unemployment and lower wage pressure do not guarantee that spending can keep outpacing income.
The thesis should change when the combination of evidence changes—not simply when another headline points in the preferred direction.
What to watch next
| Evidence | Why it matters |
|---|---|
| 14 October: September CPI and real earnings | Match wages and prices for the same month; distinguish hourly from weekly purchasing power |
| 29 October: September personal income and outlays | Test whether real spending is still outpacing real disposable income |
| 6 November: October jobs report | Look for persistence, hours worked and revisions rather than extrapolating one estimate |
| Next Costco and Target disclosures | Compare traffic or comparable sales, basket trends, membership where relevant, margins and inventory with the earlier company baselines |
The release dates come from the BLS October calendar, the BLS earnings and jobs releases, and the BEA August release. Schedules can change.
The central test remains the one in today’s post: does any relief on rates come with resilient earnings? For COST and TGT, the answer requires company evidence. Softer labour costs may help; durable customer demand and profitable execution still have to do their share.
What would be more reassuring now: resilient consumer spending or a recovery in hiring?
Sources and freshness
This research expands the revised 2 October eToro post. It uses BLS and BEA releases, the linked Reuters report for its economist poll and market snapshot, and issuer releases for the company figures. Calculations are identified in the text. BLS’s current-release and revision pages change over time; the figures above are those checked on 2 October 2026.
Macroeconomic implications and scenarios are analysis, not company guidance. No current share-price valuation, target price or new portfolio action is asserted. The cover is conceptual artwork, not a quantitative chart.
My portfolio and views, not investment advice. This article is for research and education.