INSTANT VIEW-US job growth far exceeds expectations in September -October 06, 2023 at 08:54 am EDT

Oct 6 (Reuters) – U.S. job growth surged in September,
suggesting that the labor market remains strong enough for the
Federal Reserve to raise interest rates this year, though wage
growth is moderating.

Nonfarm payrolls increased by 336,000 jobs last month, the
Labor Department said in its closely watched employment report
on Friday. Data for August was revised higher to show 227,000
jobs added instead of the previously reported 187,000.

Economists polled by Reuters had forecast payrolls rising by
170,000 jobs. Estimates ranged from 90,000-256,000 jobs. The
larger-than-expected increase was despite the tendency for the
initial September payrolls print to be biased lower because of
seasonal adjustment issues related to the return of education
workers after the summer break.

MARKET REACTION:
STOCKS: S&P 500 futures fell and were last down 0.8%

BONDS: The yield on 10-year Treasury notes rose and
was last 4.83%

FOREX: The dollar index gained 0.5% to 106.90

COMMENTS

MICHAEL BROWN, MARKET ANALYST, TRADER X, LONDON

“That certainly wasn’t in the script with headline NFP
smashing through all expectations. Must acknowledge however that
unemployment & MoM earnings printing unchanged may take some of
the shine off the headline number.”

“Clearly the labor market remains resilient, and continues
to impress, despite 500bp of tightening over the last 18
months.”

“With markets now seeing another 25bp Fed hike by year-end
as a roughly 50/50 chance, a hotter than expected CPI print next
week could seal the deal for such a move to come in November,
and spark the next leg of upside in the USD.”

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT,
MENOMONEE FALLS, WISCONSIN

“At least wage gains came in tepid. The rest was hot. The
revisions to back months is shocking, showing the first print is
grossly unreliable. If the Fed is data dependent, they’re flying
with a broken instrument panel.”

HELEN GIVEN, FX TRADER, MONEX USA, WASHINGTON DC

“Reading the signs ahead of time the big indicator for this
was JOLTS on Tuesday, posting another big upside surprise. I
wouldn’t be shocked if this crazy high figure gets revised down
a little bit next month, but it’s definitely a good sign for the
US economy.”

“Also important to note, average hourly earnings ticked down
slightly and unemployment stayed level at 3.8%, so I’d hazard a
guess the Fed is pretty pleased with this morning’s release.”

SIMON HARVEY, HEAD OF FX ANALYSIS, MONEX EUROPE, LONDON

“Today’s monstrous payrolls print and the upwards revision
to the August numbers once again highlights the difficulty in
shorting the dollar in this macro environment.”

“If it isn’t risk conditions taking a beating from a
sell-off in Treasuries, its the US exceptionalism narrative
supporting the dollar.”

“Given the strength in today’s employment figures, markets
can’t fully discount the probability of a Fed hike in Q4, even
as it coincided with weaker wage data. That’s likely to keep the
greenback supported, especially against rate sensitive
currencies.”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL
SECURITIES, NEW YORK

“It’s quite a report. The topline number was much hotter
than expected but hourly wages are cooling off nicely.”

“The main number is likely to be negative for the markets.
Bottom line is, this puts in question whether or not the Fed
stays on hold. But we do have inflation numbers next week.”

“The likelihood of a Fed hike in November has risen. This is
not what the market was looking for.”

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON,
NEW JERSEY

“This market’s current concern is interest rates more than
anything else. Numbers that suggest higher-for-longer rates will
be seen as negative for equities. Longer perspective, these
rates will eventually slow for the economy and hurt employment.
Just how far behind it will trail is the issue. At least for
today investors are concerned that rates across the curve might
move higher.”

“We haven’t found a bottom yet to the selloff (in the bond
market). I’m not sure it makes a huge difference with the
short-term rate hikes. We’re coming to the end of short-term
rate hikes probably either way – whether it’s one more or not.
The bigger concern is that as the yield curve steepens, if we
start to have longer-term rates that are above these short term
rates, it’s going to have the same effect as if they did raise
rates.”

“It’s one of the problems in a managed economy that the Fed
isn’t necessarily able to dictate all the moves in the bond
market. Their biggest control is really just on the front end.”

(Compiled by the Global Breaking News Team)