U.S. job growth accelerated in September and the unemployment rate slipped to 4.1% from August's 4.2%, further reducing the need for the Federal Reserve to maintain large interest rate cuts at its remaining two meetings this year.
The initial payrolls count for August has typically been revised higher over the past decade.
MARKET REACTION: STOCKS: S&P 500 E-minis extended 0.73% higher BONDS: The yield on benchmark U.S. 10-year notes rose to 3.934%, the two-year note yield rose to 3.8469% FOREX: The dollar index turned 0.6% higher
FED FUNDS FUTURES: Odds of a 25-bp cut at the Fed's November meeting rose to 93% from around 71% before the data, according to LSEG calculations.
COMMENTS: WASIF LATIF, PRESIDENT AND CHIEF INVESTMENT OFFICER, SARMAYA PARTNERS, PRINCETON, NEW JERSEY
“This is definitely much stronger than what was expected. I think it’s catching quite a few people by surprise. It means that the 50-basis point rate cut that we already got – which was good for sort of psychology and in the overall sentiment; and the next rate cut might not need to be as big. The initial reactions are that yields are jumping, and the market is taking off some of the degree or the number of rate cuts off the table or pushing them further out. I think on the equity side, equity markets are still buoyant. It looks like they like this. So, it could be a case of good news is good news.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
"They were much stronger than expected and obviously it negates the fear of perhaps the economy moving to negative growth anytime soon... it basically tells us economic activity in the fourth quarter is likely to remain at a solid pace. The fact that you only had 13 cents rise in hourly wages is good news for the Fed. It's a blowout report, so it's a good surprise, but I also think it may now slow the pace of rate cuts."
GENE GOLDMAN, CHIEF INVESTMENT OFFICER, CETERA INVESTMENT MANAGEMENT, EL SEGUNDO, CA
"The number was phenomenal. It came in well above expectations. The unemployment rate came down and it shows the economy is strong."
"The market is seeing good news as good news. This news today confirms that the economy is on solid footing. I'd view today's initial move in stocks with a little bit of caution because the dollar is strengthening and bond yields are higher,"
"All the data this week suggested the economy is strong. This puts a final nail in the coffin for the Fed to cut only 25 basis points."
“Another point that the market should be concerned about is that average hourly earnings increased by 0.4% m/m, which was enough to push y/y number to 4%, a five-month high.”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO
“Blockbuster payrolls report by any measure. I think a no-landing scenario for the U.S. economy has suddenly become far more plausible. This is a report that is beautiful on the headline level as well as the internals. You're looking at a sustained rise in job creation over the last three months, the unemployment rate ratcheting down, the participation rate holding steady, all of which indicate that this is not a statistical aberration that might be washed out in coming months. So ultimately what this means is that Treasury yields are spiking across the front of the curve, rate cut expectations are being pulled back, and the expectation now would be for a Federal Reserve that treads far more cautiously in easing policy.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
"A pleasant surprise to the upside, but mentally the Fed is shaving about 68,000 from the headline payrolls number. This is because the Bureau of Labor Statistics has not yet revised their numbers from their latest benchmarking study. August payrolls are also the ones most often revised because there are all sorts of issues with people going back to school.
"Despite the large upside surprise to the payrolls number, the aggregate weekly hours worked fell 0.1%. This could be because of Hurricane Helene, which wreaked havoc during the survey week.
"Unless we see a big downside surprise with the November 1st report for October, the Fed will take this as a reason to cut only 25 bps." GLEN SMITH, CHIEF INVESTMENT OFFICER, GDS WEALTH MANAGEMENT, FLOWER MOUND, TEXAS
"Friday's jobs report was stronger-than-expected and that gives the Federal Reserve flexibility to either cut interest rates by 25 basis points at their next meeting on November 7, or take a pause and revisit a potential rate cut in December. It was still the right decision for the Fed to cut rates by a deeper 50 basis points in September, which was essentially an insurance policy for the Fed to guard against any risk of a deterioration of the labor market, which had been slowing prior to Friday's report."
"The labor market data may become clouded over the next few reports by a perfect storm of factors, such as the port strike and the disruptions from Hurricane Helene. While these data impacts aren't likely to change the Fed's interest rate course, it may make it tougher for both central bankers and investors to gauge accurately how the labor market is faring.”
"The stock market has been living up to October's reputation of increased volatility, and we expect this choppiness to continue for the next few weeks as the market starts to navigate the uncertainty surrounding the election, the Federal Reserve's next move and corporate earnings reports." LINDSAY ROSNER, HEAD OF MULTI-SECTOR INVESTING, GOLDMAN SACHS ASSET MANAGEMENT (in emailed note)
"Today’s data hit a grand slam with payrolls coming in strong, positive revisions, and unemployment falling. The economy is heading into the post-season solidly. This is a beat on every aspect and the Fed must be smiling as they got their bats out! This is a credit positive as the fundamentals of this economy are on strong footing."
