The Friday jobs report was much stronger than expected

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Published Date 10/4/2024

The September jobs report was stronger than estimates, the unemployment rate thought to be unchanged from August at 4.2% dropped to 4.1%. NFP job growth expected at 140K increased to 254K and August jobs revised from 142K to 159K. It’s the strongest job growth in six months and higher than the average monthly gain of 203K over the prior 12 months. July was revised up by 55K from 89K to 144K, and the change for August was revised up by 17K from 142K to 159K. With these revisions, employment in July and August combined is 72K higher than previously reported. The number of unemployed individuals decreased by 281,000 to 6.834 million, while employment levels increased by 430,000 to 161.864 million. Private jobs were estimated at 125K increased 233K. Labor participation rate unchanged at 62.7%. The sticking point, month/month average hourly earnings expected to have declined from +0.4% to +0.3% but held at +0.4%, year/year earnings jumped from 3.8% to 4.0% with forecasts at +3.7%.

The reaction was swift, at 8:45 am ET the 10 year note increased from yesterday’s close at 3.85% to 3.94% +9 bps, MBS prices fell 24 bps on the initial reaction. The report adds to the new view that the Fed isn’t likely to lower rates as much as expected and maybe not at all; Powell and the rest of the Fed switched gears at the last FOMC meeting from completely focusing on inflation to concerns of keeping employment growing, the switch called ‘recalibration’. The more sensitive 2 year note increased 16 bps to 3.88%. In a little over three weeks the 10 year note has increased from 3.60% to 3.94% today.

Until this morning many in markets were holding for a 50 bp cut at the November FOMC meeting, today’s data should push more to expect just a 25 bps move.

Late last night the Longshoreman’s strike ended until January 15th as negotiations improved. The temporary end to the strike came after the union and the U.S. Maritime Alliance, which represents ports and shipping companies, reached a tentative agreement on wages, the union and ports said in a joint statement. The ports increased the wage proposal from 50% to 62% Most likely now, the sticking point that unions don’t want to accept new technology in the ports.

At 9:30 am the DJIA opened +236, NASDAQ +210, S&P +41. 10 year 3.97% +12 bp. FNMA 5.5 30 year coupon at 9:30 am -35 bps from yesterday’s close and -52 bps from 9:30 am yesterday.

Source: TBWS

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