US jobs boom shakes rate cut bets
Make us a preferred source
Make us a preferred source on Google
The news: US employers added 254,000 jobs in September, significantly beating expectations and showing resilience in the economy, data released by the US Bureau of Labor Statistics on Friday showed.
The numbers: The numbers exceeded the 140,000 jobs forecast by economists surveyed by Reuters and were higher than the revised figure of 159,000 jobs added in August. There were upward revisions to the data from the past two months.
The unemployment rate was also lower at 4.1%, below estimates for a steady rate of 4.2%. Wage growth also increased by 4% year-on-year, the data showed.
The data moved bets on Fed funds futures sharply towards a 25-basis-point cut in November, down almost 10 basis points from before the report, according to Bloomberg.
The news pushed US shares higher, with the Dow Jones Industrial Average rising 0.81% to close at a new record high, while the S&P 500 and the Nasdaq Composite also ended the day 0.90% and 1.22% higher, respectively.
The context: The report follows a large 50-basis-point interest rate cut by the Federal Reserve to achieve its goal of maximum employment, one of its two mandates alongside price stability.
It suggests the US economy is on course to achieve the so-called soft landing the Fed has been steering it through with high interest rates following the skyrocketing inflation that ensued after the pandemic.
The data also showed a rise in the number of people unemployed for more than six months in September to the highest in almost three years.
What they said: “This jobs number today, and the whole report, is a superb report,” Federal Reserve Bank of Chicago president Austan Goolsbee said in an interview with Bloomberg.
“I still think, as a central bank, you don’t want to react too much to one month’s report.”
Former US Treasury Secretary Larry Summers said the much-better-than-expected jobs report showed the Fed’s half-point rate cut was “a mistake”.
“Today’s employment report confirms suspicions that we are in a high neutral rate environment where responsible monetary policy requires caution in rate cutting,” he said in a statement posted on X.
“With the benefit of hindsight, the 50-basis point cut in September was a mistake, though not one of great consequence. With this data, “no landing” as well as “hard landing” is a risk the @federalreserve has to reckon with. Nominal wage growth remains well above pre-COVID levels and it does not appear to be decelerating.”
