Data released by the US Bureau of Labor Statistics on Friday showed that the US non-farm employment increased by 336,000 in September, the largest increase since January 2023, and the market expected 170,000, the previous value of 187,000. Us unemployment rate 3.8% in September, 3.70% expected, 3.80% previously. U.S. average hourly earnings rose 4.2% Yoy in September, vs. 4.3% expected versus 4.3% previously.
Employment in restaurants and bars surged to pre-pandemic levels in September, data showed. Food service industries and drinking establishments added 61,000 jobs in September, returning the number to February 2020 levels for the first time since the pandemic triggered mass layoffs more than three years ago. Elsewhere in the hospitality sector, accommodation employment increased by 16,000 in September, but remains about 10 per cent, or 217,000, below February 2020 levels.
Seema Shah, chief global strategist at Principal Asset Management, said the surge in non-farm payrolls may not be good news for markets. Not only do they suggest the economy is overheating and the Fed will need to respond with more rate hikes, but they also reinforce the "Fed will keep rates higher for longer" narrative that has been haunting the bond market for the past few weeks. Shah noted that the slight slowdown in wage growth simply could not offset the much higher-than-expected increase in payrolls and upward revisions to previous months 'data.
After the payrolls data, traders increased bets that the Federal Reserve would raise interest rates before the end of the year. The rise in implied yields on contracts tied to the Fed's policy rate suggests a close to 50 per cent chance that the Fed will raise its benchmark rate to a range of 5.50 per cent to 5.75 per cent at its December meeting. Before the jobs report, traders saw about a 34 percent chance of a 25 basis point rate hike.
S&p 500 futures extended intraday losses to 1 percent as of press time.