Wall Street does not welcome the publication of the US employment report, which took place before the start of trading on the New York Stock Exchange. At about 4 pm Italian time, the Dow Jones fell by over 400 points (-1.47%), to 29,487 points; the S&P 500 lost 1.88% to 3,674; an important sell-off also on the Nasdaq Composite, which slipped by more than 2.5% to 10.798 points.
While US job growth was lower than expected in September, and year-on-year wages did not pick up pace, far from it, the fear of an aggressive Fed on rates remains.
The reason is the trend of the unemployment rate which, according to what emerges from the data, has fallen.
Analyzing the employment report, the crucial numbers are as follows:
In September, the US economy created 263,000 new jobs, slightly below the 275,000 new paychecks estimated by Dow Jones economists. However, analysts’ estimates, in general, ranged from an employment growth of 127,000 to 375,000.
Workforce participation decreased by 0.1% to 62.3%, compared with the previous 62.4%. The growth of new jobs in July was revised upwards, from 526,000 to 537,000; employment growth in August was confirmed at +315,000 units.
On an annual basis, the growth of wages – among the parameters that monitor the inflation trend – was equal to + 5% on an annual basis, less than the expected increase of 5.1% and slowing compared to the previous growth of 5.2 %.
The September US employment report highlighted a marked slowdown in job growth.
The increase in payrolls was in fact the lowest since April 2021, confirming how the continuous rate hikes by Jerome Powell’s Fed are depressing the fundamentals of the US economy: what the US central bank wants provoke, in order to stifle inflation.
However, the sore point was the unemployment rate, which dropped from 3.7% to 3.5% to seven months, compared to the 3.7% expected by the consensus of economists.
And the result is that, “although the figure has remained in line with expectations, it seems that the markets have remained obsessed with the decline in the unemployment rate, due to the significance that the phenomenon has for the Fed”, commented the director of investments. of Bleakley Financial, Peter Boockvar, according to what is reported by CNBC.
Booackar essentially pointed out that, even considering the low numbers of initial jobless claims, the data showed that the pace of layoffs in the US labor market has remained weak, which should lead the Powell Fed to continue to aggressively raise rates.
In short, the message that arrived to the markets with the publication of the US employment report was the following: the US labor market is still in too good conditions for the Fed, which wants to cause an economic slowdown with its repeated monetary tightening, such as to stifle inflation.
As a result, the US central bank should continue to raise rates in a sustained way: a factor that, obviously, does not like equities, which fear a series of monetary tightening such as to cause a hard landing to the US economy.
The expectations of a Fed determined to remain hawkish were priced, immediately after the release of the data, by the Treasury markets: two-year US government bond rates, in particular, jumped 8 basis points, up to 4.31%. 10-year Treasury rates are approaching 3.9%.
Wall Street today is also dealing with some news that has not arrived from the Corporate America front.
Male Advanced Micro Devices, after the chipmaker giant sounded a third-quarter revenue alert, warning the numbers will be lower than anticipated. The stock slipped by more than 8%.
Also sell off on Levi Strauss, which sank by almost -6%, after the global leader in the jeans market cut its outlook.