September job growth surges unexpectedly

Oct. 6:

After preliminary and somewhat contradictory advance looks at the labor market earlier this week, today’s monthly employment report for September surprised most with a hefty growth of 336,000 nonfarm payroll jobs, nearly twice what analysts had generally expected.

Contributions to that growth included a 96,000 increase in leisure and hospitality jobs, a 73,000 increase in government employment and 41,000 new health care jobs. Manufacturing payrolls increased by 17,000 jobs, which also exceeded expectations.

At the same time, the August nonfarm payroll number was revised upward from 187,000 to 227,000, and the July number was revised from 157,000 to 236,000.

The unemployment rate remained steady at 3.8%, while underemployment moved down a hair from 7.1% to 7%. The labor force participation rate remained steady at 62.8%. Hourly earnings were up 0.2% for the month, and increased 4.2% year over year, which is just below the 4.3% annual increase noted last month. The average workweek remained steady at 34.4 hours.

Chance of rate hikes in December rises

While the chance of a Federal Reserve tightening at the Nov. 1 Federal Open Market Committee meeting remains low, the futures market sees a 49% chance of a tightening at the Dec. 13 meeting. Yesterday, that market had implied a 37% chance of such a tightening. There is plenty of time before the December meeting for more information to roll in, beginning with the CPI report next Thursday.

State of the market

Bond yields, which had begun to relax a little, spiked again at the prospect of another rate hike this year and the maintenance of a higher rate environment for a longer time span. The Dow traded down this morning. Relative to Thursday morning, Treasury yields were up.