The US jobs report for September exceeded expectations, with non-farm payrolls increasing by 254K compared to the anticipated 140K. The unemployment rate fell slightly to 4.1%, almost reaching 4.0%, and the participation rate remained steady at 62.7%. Private payrolls saw a surge of 223K, while average hourly earnings rose by 0.4% month-over-month and 4.0% year-over-year, both above forecasts. Manufacturing payrolls dropped by 7K, showing improvement from previous data.
The strong data from the jobs report has diminished expectations for a Federal Reserve rate cut at the upcoming November meeting, leading to a rise in the US dollar. Fed’s Goolsbee, who described the report as “super,” highlighted the positive impact of the end of the port strike as well. He emphasized the need for more reports like this to build confidence in achieving full employment and strong GDP growth.
While the Fed is still determining the neutral interest rate, Goolsbee suggested it could fall within the range of 2.5-3.5%, emphasizing the importance of maintaining current economic conditions. He acknowledged that while broad indicators show the labor market cooling, he dismissed the idea of a “soft landing” for the economy. The ideal scenario for the Fed would be an unemployment rate between 4-4.5% and inflation around 2%.
The positive news from the jobs report sent stocks higher, with the Dow industrial average closing at a new record high. The Dow rose by 341.16 points, the S&P index by 51.13 points, and the NASDAQ index by 219.37 points. The small-cap Russell 2000 also saw a gain of 32.65 points. For the trading week, the gains were modest across the major indices.
In the US debt market, yields saw a sharp increase, with the 2-year yield at 3.928%, the 5-year yield at 3.807%, the 10-year yield at 3.967%, and the 30-year yield at 4.249%. Mortgage rates also rose by 6.5%. Looking at the major currencies, the GBP and USD emerged as the strongest, while the JPY was the weakest.
Overall, the strong performance of the US job market in September has bolstered confidence in the economy and reduced the likelihood of a Fed rate cut in November. The positive momentum in the stock market and rising yields indicate a favorable outlook for the US economy in the near term.
