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The US added 336,000 new jobs in September, far more than expected, pushing bond yields to a new 16-year high and fuelling investors’ anxieties that interest rates will stay higher for longer.
The Bureau of Labor Statistics data, which easily surpassed expectations of 170,000 new jobs, reignited the bond sell-off that has swept global markets over the past two weeks.
Ten year US government borrowing costs reached their highest since 2007 after the publication of the 336,000 figure, which was also far more than August’s upwardly revised total of 227,000.
In an indication of growing market expectations that interest rates will remain high over an extended period, stock futures dropped as bond yields rose.
Futures tracking the S&P 500 fell 0.9 per cent ahead of the New York open, while futures tracking the Nasdaq 100 were down 1.2 per cent.
The yield on the policy-sensitive two-year Treasury jumped almost 0.13 percentage point to 5.15 per cent in the minutes after the report.
The 10-year yield added 0.17 percentage points to reach almost 4.89 per cent, while the 30-year yield topped 5.05 per cent for the first time since August 2007.
The BLS data also showed unemployment at 3.8 per cent, in line with August’s figure and slightly above expectations of 3.7 per cent.
Average hourly wages rose by 0.2 per cent month on month, matching the rise reported in August but coming in below expectations of 0.3 per cent growth. On an annual basis, wages rose by 4.2 per cent, compared with 4.3 per cent in the prior period.
The report will offer the Fed an important data point as the central bank decides whether its mission to quell inflation is succeeding — or whether rates, already at a 22-year high, need to rise further. The Fed meets again at the end of the month.
The Fed held interest rates at 5.25-5.5 per cent at its most recent meeting on September 20. But most of the central bank’s officials expect one more increase in 2023 and a slower pace of cuts over the next two years, according to data from the Fed.
Fed chair Jay Powell recently said that the central bank would proceed “carefully” with its next interest rate decisions. Many officials have stressed that the central bank can afford to be “patient” after raising interest rates several times over the past 18 months.
Mary Daly of the San Francisco Fed said on Thursday the central bank did not have to “rush to any decisions” given that “monetary policy is restrictive and financial conditions are tight”.
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