NEW YORK (Reuters) -The pace of U.S. job growth accelerated more than expected in September, and the unemployment rate increased, indicating the labor market remained on the sluggish side, while expectations the Federal Reserve was unlikely to cut rates in December remained largely unchanged.
Nonfarm payrolls increased by 119,000 jobs in September, after a downwardly revised 4,000 drop in August, the Labor Department data showed on Thursday. Economists polled by Reuters had forecast 50,000 jobs added last month.
The unemployment rate rose to 4.4% in September from 4.3% in the previous month.
The release of the jobs report had been delayed due to the U.S. government shutdown and the October nonfarm payrolls will instead be combined with November’s employment report now due on December 16, the Bureau of Labor Statistics said.
MARKET REACTION:
STOCKS: S&P E-minismoved higher and were last up 108.5 points, or 1.63%.
BONDS: Treasury yields briefly jumped before reversing course, with the yield on the benchmark U.S. 10-year note flat at 4.131% and the two-year note yield off 2.8 basis points to 3.571%.
FOREX: The dollar index pared gains after a brief spike and was last up 0.09% to 100.18.
COMMENTS:
JAN NEVRUZI, U.S. RATES STRATEGIST, TD SECURITIES, NEW YORK:
“Depending on your priors from the Fed, it probably gives both the hawks and the doves something to confirm what they thought. We have a little bit of a stronger number on the headline side, despite the revisions, but the unemployment rate almost rounded up to 4.5%.”
“We’re rallying (in Treasuries) because we’re bringing the pricing back closer to a coin flip (for the December Fed meeting).”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
“What we’re seeing here is the first glimpse of a jobs report since the government shutdown, and it certainly is not reflecting what may have happened in the month of October and what’s presently happening now in November.
“There have been a lot of layoffs that are not showing up yet, but I believe that they will show up. The labor market perhaps not as strong as the perception. I don’t think it’s really going to mean that very much.
“I don’t think (the Fed) has enough labor data to make a decision. And I think that’s why bets on a on a rate reduction have decreased substantially. So I think the Fed is going to have to go on its own guts. And from a contrarian viewpoint, I do believe that they will cut by 25 basis points. And the reason is the economy is not that strong and this labor market is not that strong. Companies are laying off left and right.
“The rhetoric that we’re hearing from a lot of Fed members is just playing it safe, from Powell down to the hawkish ones. But I think the dovish members are probably going to win, and they are going to be right.”
WASIF LATIF, CHIEF INVESTMENT OFFICER, SARMAYA PARTNERS, NEW JERSEY:
“It was definitely a stronger number than what was expected. So I think you’re seeing immediate adjustment based on that and between the tug of war of the Fed: would they or wouldn’t they cut. The “they-won’t-cut number” is weighing out. But I don’t think it’s a done deal. There’s more to come between now and the actual Fed announcement day. As the data continues to come out, we might see this tug of war. The September jobs number was also going to be an okay month. It’s October that’s more anticipated because most of the layoff announcements were done in this month. If that month was to be released, it would likely show greater amounts of job weakness than September is showing. And it would clearly tilt the market in favor of cutting. But we don’t know that data yet so unfortunately, we have to go by what we have.”
ART HOGAN, CHIEF MARKET STRATEGIST, B RILEY WEALTH, NEW YORK:
“The problem with all of this is (that) the report is dated, and the next report won’t be out until after the Fed meets in December. So that certainly puts them in a conundrum and likely doesn’t improve the chance one way or the other that they could see their way clear to cutting rates.””The markets are reacting positively to a couple of very solid earnings reports, both Nvidia and Walmart. So I think the market reaction post the report likely has more to do with earnings than it does to do with economic data.”
JAKE DOLLARHIDE, CHIEF EXECUTIVE OFFICER, LONGBOW ASSET MANAGEMENT, TULSA, OKLAHOMA:
“The jobs report could cause the market to rally. Good news could be good news in this case… and the unemployment rate ticking up still gives the Fed a lot of leeway toward leaning toward lowering rates. Where there’s smoke, there’s fire.
“The data is just now rolling in. A lot of data is going to roll in between now and the December meeting. The gates are wide open on this dam. This river of data is about to come flooding in. We’re going to see exactly what we’ve been missing the last two months.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“Dated data is better than no data, but it’s not all that illuminating about where we are now or where we’re headed. It confirms that the trend for the cyclical parts of the economy were struggling while the steady-eddy parts of the economy, like health care, were still doing fine.
“Fed officials that claim they don’t have the data to make a decision are ignoring the wide array of surveys and private sector data sources that indicate the labor market is softening. Wage growth isn’t accelerating. Tariff exemptions for food items will reduce the perceived threat of inflation. The next Fed decision could be to cut, but there could be a record number of dissents.”
(Compiled by the Global Finance & Markets Breaking News team)
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