September jobs report slashes Fed rate hike expectations
A weaker-than-expected US jobs report showing just 29,000 new positions in September triggered a sharp market rally as investors scaled back bets on a Fed rate hike.
The September jobs report showed far weaker hiring than economists anticipated, sending a clear signal of a cooling labor market. US employers added just 29,000 jobs last month, a figure starkly below the 90,000 forecast. The unemployment rate rose to 4.2%. Initial job reports for the prior two months were revised sharply lower, with a combined downward revision of 60,000 jobs. July's labor market actually contracted by 10,000 jobs after revisions, while August saw 133,000 jobs added. The Labor Department released the employment data on Friday.
Wage growth slows amid sectoral shifts in hiring
Growth in average hourly earnings slowed significantly, reaching its lowest annual pace in over five years. Earnings rose just 0.1% over the month in September. Annual wage growth decelerated to 3.0%, down from 3.1% in August.
Job gains were concentrated in specific sectors while others contracted. Healthcare led hiring, adding 17,000 positions. Construction employment rose by 11,000 and manufacturing added 9,000 jobs. Conversely, information, financial, and professional industries saw job losses, with financial activities employment falling by 7,000.
Markets rally on rate cut hopes as yields fall
Stocks rose and Treasury yields fell immediately after the jobs data, as investors interpreted the soft figures as reducing the need for further Federal Reserve tightening. The weaker-than-expected report reduced the odds of a near-term rate hike. Lower oil prices also contributed to a risk-on sentiment. At least two top Fed policymakers had already pushed back against another rate increase earlier in the week.
Investors increased bets that the Federal Reserve will keep interest rates on hold at its next meeting. Traders assigned just a 20% probability of a 25 basis point rate hike in October, down from 26% before the report's release.
| Asset | Performance |
|---|---|
| US Treasury 10-year yield | Fell 6 basis points to 5.174% |
| US Treasury 30-year yield | Fell 4.5 basis points to 5.568% |
| S&P 500 index | Rose 1% |
| Nasdaq Composite | Jumped 1.6% in early New York trading |
Tech and chip stocks lead gains in broad market advance
Semiconductor stocks and megacap technology shares drove the market advance. The Philadelphia chip index rose 3.1%. Nvidia touched an intraday record high, gaining 2.5%. Tesla gained 4.1% and Oracle rose 3%. SpaceX-linked shares added 5.5%.
Other notable gainers included RocketLab, which rose 7.4%, and ARM Holdings, up 6.9%. Coinbase rose nearly 3.1%. The Nasdaq stock index hit a record high following the jobs report. The rally occurred amid a string of recent data showing resilient economic activity coupled with slower-than-expected price increases. Traders now see only a 20% chance of an October rate hike.
