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The United States added 336,000 new jobs in September, much more than expected, pushing bond yields to a new 16-year high and stoking investor fears that interest rates will remain high for longer.
The Bureau of Labor Statistics data, which easily exceeded expectations of 170,000 new jobs, reignited the bond selling that has swept global markets over the past two weeks.
Ten-year US government borrowing costs reached their highest levels since 2007 after the figure was published at 336,000, which was also well above August’s upwardly revised total of 227,000.
Bonds partially recovered after the initial selloff, but yields remain near their highest levels in more than a decade, reflecting market expectations that the U.S. Federal Reserve will keep interest rates high over an extended period.
Willie Tollett, chief investment officer at Franklin Templeton Investment Solutions, said the “incredible jobs numbers” were “clearly hotter than expected”.
He added: “My expectation, and the market’s belief seems to be, is that this increases the odds of an interest rate hike by the Fed.”
But President Joe Biden praised the numbers, highlighting that the unemployment rate has remained below 4 percent for the longest period in 50 years, while inflation is now “the lowest….” . In any major economy in the world.
He added: “It is not a coincidence. We are working to develop the economy from the middle out, and from the bottom to the top.”
Biden also urged lawmakers to “get to work” on a deal to keep the government funded after narrowly avoiding a shutdown last month, or risk jeopardizing recent job gains.
In the minutes after Friday’s report, the yield on the policy-sensitive two-year Treasury note jumped about 0.13 percentage point to 5.15 percent. After paring some of those gains, it was still trading up 0.06 percentage points on the day to 5.09 percent in late afternoon trading in New York.
The 10-year bond yield added 0.17 percentage points to nearly 4.89 percent, while the 30-year bond yield exceeded 5.05 percent for the first time since August 2007, although both fell.
The Standard & Poor’s 500 index reversed its initial decline and rose to close 1.2 percent higher, its largest one-day jump since the end of August. The Nasdaq Composite Index rose 1.6 percent.
The Fed’s Friday report provides an important data point as the central bank decides whether its mission to curb inflation has been successful — or whether interest rates, already at a 22-year high, need to rise further. The Fed meets again at the end of the month.
Futures markets on Friday forecast a 50 percent chance the Fed would raise interest rates again by the end of the year, up from 40 percent before the jobs data.
Ajay Rajadhyaksha, head of interest rates at Barclays, noted that the Fed will have to raise interest rates further unless next week’s consumer price data shows inflation pressure easing.
“I think the Fed is going to have to go, unless the CPI is unusually weak,” he said, adding that unless the jobs number is low, it will be difficult for the bond market to “find a footing,” given “how much we have.” Who support. It’s already sold.”
In a sign that the labor market remained strong during the final summer months, the July figure was also revised upward by 79,000 to 236,000.
But PGIM’s chief global fixed income economist, Dalip Singh, expressed doubt that Friday’s jobs numbers would force “the Fed to take a more hawkish stance,” arguing that the rise in bond yields was a “substitute” for the Fed’s reason to raise benchmark interest rates. .
He added that there is “a lot of evidence that the labor market is regaining its balance and that inflation is calming.”
Bureau of Labor Statistics data showed the unemployment rate at 3.8 percent, which was in line with the August number and slightly higher than expectations of 3.7 percent.
Average hourly earnings rose 0.2 percent month-on-month, matching the increase reported in August, but came in below expectations of 0.3 percent — figures that Jefferies’ Thomas Simons said showed details of a report on… Friday “wasn’t as strong” as the headliner. Salary growth.
On an annual basis, wages rose by 4.2 percent, compared to 4.3 percent in the previous period.
The Fed kept interest rates at 5.25-5.5 percent at its last meeting on September 20. But most central bank officials expect another increase in 2023 and a slower pace of cuts over the next two years, according to data from the Federal Reserve. Nourish it.
Many officials stressed that the Fed can be patient after raising interest rates several times over the past 18 months.
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