Non-Farm Payrolls (NFP) Close Another Good Week for US Employment

This week was more about the jobs numbers from the US, which started with the JOLTS job openings which posted a decent jump in September back above 9 million, coming at 9.61M and beating expectations of 8.81M after the slowdown in August, which were also revised higher. On Wednesday we saw some weak numbers from the ADP, but most people tend to oversee those numbers, which they did, as markets kept pushing the USD higher.

On Thursday Unemployment Claims stuck closer to 200K, beating expectations, while the number everyone was looking at was the Non-Farm Employment Change (NFP) which also beat expectations as shown below, jumping above 300K. Last month’s numbers were revised considerably higher as well, confirming once again that employment remains in a good shape. Although the USD continued the retreat on Friday, but that is due after such a strong really. This should help keep the USD bullish once the retrace is over.

September Non-Farm Payrolls +336K vs +170K expected

• September non-farm payrolls +336K vs +170K expected
• Prior +187K (revised to +227K)
• Two-month net revision +119K vs -110K prior
• Unemployment rate 3.8% vs 3.7% expected
• Prior unemployment rate 3.8%
• Participation rate 62.8% vs 62.8% prior
• U6 underemployment rate 7.0% vs 7.1% prior
• Average hourly earnings 0.2% m/m vs +0.3% expected
• Average hourly earnings 4.2% y/y vs +4.3% expected
• Average weekly hours 34.4 vs 34.4 expected
• Change in private payrolls +263K vs +160K expected
• Change in manufacturing payrolls +17K vs +5K expected
• Household survey +86K vs +222K prior
• Birth-death adjustment -119K vs +103K prior

In the FED funds market, the odds of a November rate hike increased to 30% from 22% yesterday. Treasury rates have risen 5-6 basis points after the announcement, and the US currency has risen. US 10s are currently up to 4.84%, while 30s are just around 5%.

The fact that the White House scheduled Biden for a victory lap after receiving the pre-release was a dead giveaway that this would be a positive report, as I predicted.  This is a worry for the broader market since it verifies the recent rise in Treasury rates and may drive 10s to 5%. In turn, the long-term rise is doing most of the FED’s work for them, which implies they may not need to hike. However, this means that the economy, notably cars and housing, is particularly vulnerable to a slump next year.