US September Payroll Surge Removes November 50 Basis Point Cut from Consideration, Reports Reuters

U.S. Job Growth Surges in September, Unemployment Rate Declines

U.S. job growth showed notable acceleration in September as the unemployment rate dropped to 4.1%, down from 4.2% in August. This development has led to a reduced necessity for the Federal Reserve to implement significant interest rate cuts in its upcoming meetings. According to data from the Labor Department, nonfarm payrolls rose by 254,000 in September, following an upward revision to 159,000 in August. Economists had predicted an increase of 140,000 jobs for September, after an earlier estimate of 142,000 for August. Historically, initial payroll figures for August have often been revised upward in the past decade.

Market Reactions

In the wake of this report, markets reacted positively:

• Stocks: E-minis surged by 0.73%.
• Bonds: The yield on 10-year U.S. Treasury notes rose to 3.934%, and the two-year yield climbed to 3.8469%.
• Forex: The dollar experienced a 0.6% increase.

Federal Reserve Insights

Following the data release, the likelihood of a 25-basis point interest rate cut at the Federal Reserve’s November meeting surged to 93% from approximately 71%, according to calculations.

Expert Commentary

Wasif Latif, President and Chief Investment Officer at Sarmaya Partners, noted the strength of the report was surprising and indicated that the next potential rate cut might not need to be as substantial. He emphasized that initial market reactions showed increased yields with the perception that the need for immediate rate cuts could be diminished.

Peter Cardillo, Chief Market Economist at Spartan Capital Securities, shared that the robust job numbers alleviated fears of an impending economic downturn and suggested steady economic activity into the fourth quarter. He regarded the modest rise in hourly wages as favorable for the Fed.

Gene Goldman, Chief Investment Officer at Cetera Investment Management, highlighted the impressive job figures and declining unemployment rate as signs of a strong economy. However, he advised caution regarding the initial market response due to rising dollar strength and bond yields, asserting that the data pointed to a solid economic base.

Karl Schamotta, Chief Market Strategist at Corpay, described the report as a “blockbuster,” asserting that a scenario of sustained economic growth without potential setbacks had become much more feasible.

Brian Jacobsen, Chief Economist at Annex Wealth Management, regarded the report as a pleasant surprise but noted that adjustments to previous payroll figures could impact perceptions. He indicated that unless there is an unexpected downturn in the upcoming report for October, a modest rate cut seemed likely.

Glen Smith, Chief Investment Officer at GDS Wealth Management, echoed that the stronger-than-expected jobs report gave the Fed more flexibility regarding its interest rate decisions in the upcoming months. He acknowledged potential disruptions from external factors like a port strike and Hurricane Helene, which might cloud future labor market data.

Lindsay Rosner, Head of Multi-Sector Investing at Goldman Sachs Asset Management, concluded that today’s data reflected a significant positive trend, indicating the economy is on a robust path.

Overall, the strong job growth and decline in unemployment suggest a thriving labor market, which may influence future decisions by the Federal Reserve regarding interest rates.