Unexpected strength in the labor market creates a dilemma for the Federal Reserve. Policymakers are grappling with the question of whether to raise interest rates further to cool the economy and tackle rising inflation.
In a welcome development for the US economy, the Labor Department Issued Its monthly employment situation report showed non-farm payrolls increased by an impressive 336,000 in September.
The highlight of the September jobs report is that growth in non-farm payrolls exceeded the Dow Jones Consensus Estimate of 170,000 by a wide margin. This positive development was even more impressive compared to the previous month.
August saw an increase of nearly 100,000 jobs, making it a big jump from the 336,000 jobs gain in September. This steady progress is a promising sign for both job seekers and the broader economic recovery.
While the increase in non-farm payrolls was undoubtedly a positive sign, wage growth appeared softer than anticipated. Average hourly earnings rose 0.2% for the month and 4.2% from a year earlier, below the respective estimates of 0.3% and 4.3%.
From a sector perspective, the leisure and hospitality sector saw the highest employment growth in September, adding 96,000 new jobs. Other sectors that experienced growth included government (73,000 jobs), health care (41,000 jobs), and professional, scientific, and technical services (29,000 jobs).
Service-related industries played a significant role in overall employment growth, contributing 234,000 jobs, while goods-producing industries added only 29,000 jobs. Average hourly earnings in the leisure and hospitality industry remained flat for the month but saw a 4.7% increase year over year.
Impact of Non-Farm Payrolls Report on US Economy
Unexpected strength in labor market poses dilemma federal Reserve, Policymakers are grappling with the question of what to do raise interest rates To cool the economy and combat rising inflation. Although there have been mixed messages from Fed officials, the consensus seems to be leaning toward keeping rates higher for a more extended period.
Ian Lingen, head of US rates strategy at BMO Capital Markets. commented,
“Overall, this was a stronger-than-expected print without question – the lack of wage growth is good news for the Fed but nothing that will keep them from hiking in November.”
This sentiment is in line with the market’s expectation of a possible quarter-point rate hike on November 1, Lingen indicated.
The release of the strong jobs data had an immediate impact on US Treasury yields. The yield on 10-year Treasuries rose nearly 13 basis points to 4.839%, near a 16-year high. Earlier in the week, it briefly rose to 4.884%, reflecting investor concerns about the possibility of tighter monetary policy.
The 2-year Treasury yield last traded at 5.14%, up more than 11 basis points. It is important to understand the inverse relationship between yields and bond prices. As yields rise, bond prices fall, which can have a cascading effect on various financial markets, including stocks and housing.
On the other hand, stock market futures turned sharply negative after the report, with Dow futures down more than 250 points.
Benjamin Godfrey is a blockchain enthusiast and journalist who loves writing about real-life applications of blockchain technology and innovations to promote general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies drives his contributions to well-known blockchain media and sites.
Subscribe to our Telegram channel.
Add
Bitcoin Crypto Related Post