Insanely huge beats or misses in NFP data are always interesting.  They seem to have an uncanny ability to completely change the tenor of conversation surrounding Fed policy and economic prospects.  Before Friday, labor market strength had been an anchor for many arguments in favor of a 2015 Fed rate hike.  After all, even if the Fed didn't have the inflation it was looking for, at least it had strong jobs gains.

First thing's first when it comes to ONE crazy jobs report having any sort of capacity to change the Fed's stance: it doesn't.  Time and time again, market participants, analysts, and members of the media will raise questions about a big NFP surprise potentially changing the course for the Fed.  Evidence is not on their side.  If anything, the Fed has historically reacted too slowly to changes in labor market metrics.  If it was really about having a low unemployment rate and consistent 200k+ NFP prints, the Fed would have hiked rates months ago.

Clearly, the Fed wasn't looking for 200k+ NFP and 5.5-ish unemployment, so clearly a big drop under 200k payrolls isn't going to change anything in and of itself, but it's not insignificant.  First of all, it also changed the previous two prints by a fair amount.  The white sections in this chart show where payrolls were before Friday's revisions.  The teal line shows where payrolls would have been if we'd hit the forecast.

Putting aside any nitty gritty assessment of what the actual payrolls levels might mean, let's just think about what it means to see a "big miss."  If the average economic report has been weaker than expected recently and now the last big bastion of defense against that stagnation is also showing the capacity to weaken, what do we really have?  Even if the next jobs report makes up for some of this slide, would it change anything about the fact that the rest of the economy just isn't firing on all cylinders?  

NFP changes the dialogue from "hopefully, things will continue to improve" to "oh no, what if things continue to weaken?"  This is not the dialogue the Fed wants on the table when they're looking for economic data that's actually strong and consistent enough to justify a rate hike.  While one jobs report doesn't do anything to sway the Fed in and of itself, it DOES set the stage for the next NFP or two to cast deciding votes as to whether or not the Fed will have to consider that labor market growth may be leveling off just as they're about to hike.

Most importantly in the near term, the NFP miss raises awareness and sensitivity regarding other economic data.  It's like this: before Friday, a market observer could say "I don't care so much that other data was bad, because look at how NFP has been!"  Now the that NFP tanked, the rest of the data becomes more important.  Bulls need it to justify their bullishness, and bears need it to provide another solid early indication for the next NFP surprise.