The labor market in the US shows no signs of slowing down and the markets have immediately translated today’s data as a sign of green light for another ‘hefty’ 75 basis point hike from the Fed in less than a month. All of this translates into slightly higher yields (Treasury 10y at 3.873%) and sales on shares. On Wall Street, the Nasdaq dropped 2.5%, while the S&P 500 dropped around 1.8%.
The numbers of September
The September employment report highlighted the creation of 263,000 new jobs in September, the lowest rate since April 2021. The unemployment rate dropped to a surprise 3.5% from 3.7% thanks to the combination. increase in employment (+ 204 thousand) and people leaving the workforce (-57 thousand). “The lack of adequate workers continues to constrain the economy with job vacancies that exceed the number of American unemployed by more than 4 million. This indicates that the Fed has more work to do to slow the economy and keep inflation in check, ”he comments James Knightley, Chief International Economist di Ing.
The reports of the past months have been revised upwards (+11 thousand jobs in total compared to previous estimates). The labor force participation rate stood at 62.3% (still far from the February 2020 levels when it stood at 63.3%). Average wages rise by 0.3% m / m (consensus + 0.3%). Wages rose 5% yoy (consensus + 5.1%).
Ing Knightley believes that at this point uThe increase of 75 basis points at the Federal Open Market Committee meeting on November 2 is practically established also considering the fact that core inflation is set to rise further (consensus indicates + 6.5% in September from 6.3% previously).
Market reaction
After the publication of today’s report on the US world of work, therefore, the probability that the Fed will remain aggressive also increases in the meeting at the beginning of November. Rates would thus rise from the 3% -3.25% range to the new 3.75% -4% range.
“The possibility that the Fed may be more hawkish has resulted in an immediate appreciation of the dollar on the currency markets and strong selling on equities especially on US tech stocks (Nasdaq 100 futures have lost 150 points since data release). The euro / dollar drops to new weekly lows at 0.9740 ”, underlines Filippo Diodovich, Senior Market Strategist, IG Italia.