Jobs report is bad news for the inflation hawks
A blockbuster month of jobs gains sent bond yields higher and stocks lower Friday. Expectations for more rate hikes by the Federal Reserve are climbing.
Another pause by the Federal Reserve in November is no longer a slam dunk after Friday’s boffo jobs report. 337,000 jobs added last month? That was nearly twice the consensus forecast of 170,000.
The unemployment rate remained at a still relatively low 3.8%. And while wage gains cooled a bit, to 4.2% year-over-year, in September, any number that begins with a 4 is going to be higher than what the Fed would like. (Andrew Patterson, a senior economist with Vanguard, noted in a report though that the 4.2% wage jump is the lowest since June 2021.)
Still, stocks slid on the jobs report news Friday morning. Long-term bond yields spiked again, rising to about 4.85%…the highest level in 16 years. The big takeaway here? Investors seem to be worried that the Fed’s rate hiking spree isn’t over yet. To wit, fed funds futures on the CME were pricing in only about a 20% chance of a quarter-point increase on November 1 (as opposed to no rate move) yesterday. Odds are now up to more than 30% for a 25 basis point increase at the next FOMC meeting.
Of course, this is just one data point. And there will be more economic reports, including a key consumer price index (CPI) release on Thursday October 12. So in the immortal words of former NFL star Terrell Owens…getcha popcorn ready. It’s going to be an interesting couple of weeks for the market. Oh, did I mention that third quarter earnings season is coming too? But more about that next week.