Aurelia Butler

OTTAWA (Reuters) – Canada’s economy more than tripled expectations by adding 63,800 jobs in September and wages continued to soar, data showed on Friday, upping the chances for another rate hike.The jobless rate stayed at 5.5% for a third consecutive month, Statistics Canada said. Analysts polled by Reuters had forecast a net gain of 20,000 jobs and for the unemployment rate to edge up to 5.6% from 5.5% in August. The average hourly wage for permanent employees rose 5.3% from September 2022, up from the 5.2% annual rise in August. “That employment report today really blew away market expectations. Wage growth is also beating market expectations,” said Michael Greenberg, a portfolio manager for Franklin Templeton Investment Solutions.”Despite the aggressive rate hikes by the Bank of Canada, clearly demand remains strong and companies continue to hire. This suggests we could well see another rate hike in November or December,” Greenberg said. The central bank, which has hiked rates 10 times in the past 18 months, has stressed that it will be hard to fully curb inflation if wages maintain their current patterns of rising between 4% and 5% annually.Money markets increased bets for a rate increase later this month after the jobs figures were published. They now see about a 40% chance for a hike later this month compared to a 28% chance before the data.The Canadian dollar edged 0.1% lower to 1.3718 per greenback, or 72.90 U.S. cents, as U.S. job growth also beat expectations.The Canadian 10-year yield was up 12 basis points at 4.255%, trading near a 16-year high.Canada’s labor market, supported by strong immigration, has been resilient even as the Bank of Canada raised its key overnight rate to a 22-year high of 5% to cool the economy.”The upward trend in employment continues to occur in the context of the highest rate of population growth since 1957,” Statscan said, noting that the population aged 15 and older increased by 82,000 in September.With September’s robust gains, the economy is averaging 30,000 monthly employment growth this year, up from 25,000 a month earlier.Part-time employment growth, which has been outpacing a rise in full-time work this year, drove the gains in August with a net 48,000 positions added in the month, Statscan said.Employment in the services sector increased by a net 74,300 jobs, mostly in educational services, and more than offset 10,500 positions lost in the goods sector. More

NEW YORK (Reuters) – Benchmark 10-year U.S. Treasury yields hit 16-year highs on Friday after data showed that employers added 336,000 jobs in September, well above the 170,000 that was expected by economists.Data for August was also revised higher to show 227,000 U.S. jobs added instead of the previously reported 187,000. Monthly wage growth remained moderate, with average hourly earnings rising 0.2% after a similar gain in August. In the 12 months through September, wages increased 4.2% after advancing 4.3% in August.”The topline number was much hotter than expected but hourly wages are cooling off nicely,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “This puts in question whether or not the Fed stays on hold.” Benchmark 10-year notes reached 4.887% and 30-year yields hit 5.053%, both the highest since 2007.Two-year notes rose as high as 5.151%. They are holding below the 5.202% level hit on Sept. 21, which was the highest since July 2006.The closely watched yield curve between two- and 10-year notes steepened to minus 25 basis points, the smallest inversion since October. October 6 Friday 8:55AM New York / 1255 GMTPrice Current Net Yield % Change (bps) Three-month bills 5.36 5.52 0.018 Six-month bills 5.36 5.5968 0.040 Two-year note 99-194/256 5.1298 0.105 Three-year note 99-32/256 4.9481 0.125 Five-year note 99-28/256 4.8283 0.145 Seven-year note 98-130/256 4.8798 0.154 10-year note 92-72/256 4.8704 0.154 20-year bond 89-112/256 5.2367 0.163 30-year bond 85-248/256 5.0386 0.152 More

(Reuters) – The Federal Reserve held its benchmark overnight interest rate steady at its Sept. 19-20 policy meeting. New data will shape whether the U.S. central bank continues to stand pat at its Oct. 31-Nov. 1 meeting or proceed with another rate increase.The Fed’s target policy rate has been raised to the 5.25%-5.50% range from near zero in March of 2022, and inflation measured by the Fed’s preferred personal consumption expenditures price index (PCE) was 3.5% in August, compared to a peak of 7% last summer.Fed Chair Jerome Powell has said the pieces of the low-inflation “puzzle” may be aligning, but he does not trust it yet.Here is a guide to some of the numbers shaping the policy debate:EMPLOYMENT (Released Oct. 6, next release Nov. 3):Job growth in September blew past expectations in a confounding turn for Fed officials who thought the labor market had started to cool, likely stiffening the case for an additional rate increase. Employers added 336,000 jobs last month, nearly double what economists polled by Reuters had expected. Revisions to prior months tacked on an additional 119,000 jobs added to the July and August totals, upending a trend Fed officials said was a sign of a labor market coming back into balance. The unemployment rate remained steady at 3.8%. Hourly wages grew at a still brisk 4.2% on a year-over-year basis, though the month-to-month change of 0.2% was more contained. JOB OPENINGS: (Released Oct. 3, next release Nov. 1)Powell keeps a close eye on the Labor Department’s Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and particularly on the number of job openings for each person without a job but looking for one. That key ratio clung to its downward trend in August as the Fed’s rate hikes have slowed labor market demand. It’s now about 1.5-to-1, compared with the nearly two jobs for every person seeking work during most of 2022. Levels around 1.2 were considered tight for the U.S. labor market before the coronavirus pandemic.INFLATION (Released Sept. 29, next release Oct. 12):A key inflation measure fell in August, adding to what many economists feel is likely to be a steady disinflation. The PCE price index, stripped of volatile food and energy costs, rose 3.9% on a year-over-year basis compared to 4.3% in July, and recent month-to-month increases have averaged close to the Fed’s 2% target. The headline rate did increase slightly, from 3.4% to 3.5%, but largely on the basis of energy costs. The Fed uses the PCE measures to set its inflation target, but the decline in the “core” measure will be seen as evidence of slower price increases ahead.Consumer price inflation rose for a second straight month, to 3.7% in August versus 3.2% in July. But the rise was largely the result of higher gas prices, which can be volatile and which Fed officials discount in analyzing price trends. More important to the central bank, underlying “core” inflation stripped of energy and food costs continued its decline, falling to 4.3% on a year-over-year basis compared to 4.7% in July.While the overall picture is somewhat mixed, the inflation data in recent months likely doesn’t change the policy outlook. But it does highlight the time it may take for Fed officials to be confident in a continued inflation decline.INFLATION EXPECTATIONS (Released Sept. 29, next release Oct. 13)Consumers’ estimates of what inflation will average over the next 12 months and the next five years fell notably in September, the University of Michigan reported. At the one-year horizon, the inflation expectation fell to 3.2% from 3.5% in August. At five years, the reading fell to 2.8% from 3.0%.The declines will be comforting to Fed officials who worry that rising inflation expectations can make consumers act in ways that will keep actual inflation higher. The one-year rate, notably, is now around its 40-year average.RETAIL SALES (Released Sept. 14, next release Oct. 17):Retail sales rose more than expected in August, increasing 0.6%. While that was largely due to higher gasoline prices, a separate measure of sales more directly related to economic output also rose slightly even though economists expected it to decline. Even as prior months’ sales were revised lower, the August report showed household spending likely still adding to overall economic growth that has been on the central bank’s radar as an inflationary risk.PRODUCER PRICES (Released Sept. 14, next release Oct. 11)The producer price index (PPI) for August jumped 0.7%, the largest monthly increase since the peak of the Fed’s inflation worries in June of 2022. Goods prices spiked a full 2%, another reason the central bank will be reluctant to declare its inflation battle over. Yet much of that was due to a jump in fuel prices, the sort of thing the Fed will discount. An index of service industry prices rose just 0.2%, and a measure of retailer and wholesaler margins fell, reinforcing arguments that inflation should continue to fall. More

LONDON (Reuters) – Blow-out U.S. jobs growth figures on Friday compounded investor worries that Federal Reserve interest rates will stay elevated for longer or even rise further, sending the dollar higher and casting a pall over stocks and bonds.U.S. non-farm payrolls grew by 336,000 in September, far exceeding a consensus estimate of 170,000 rise. The unemployment rate also remained unchanged at 3.8%, an 18-month high.U.S. stock futures turned lower after the data.The dollar index, which rose after the numbers were released, was up 0.5%, with the yen falling closer to 150 yen to the dollar, as stock indexes in London and Europe pared their gains for the day.Simon Harvey, head of FX Analysis at Monex Europe, said the “monstrous payrolls” figures and upwards revision to the August numbers will support the dollar’s advance.”Given the strength in today’s employment figures, markets can’t fully discount the probability of a Fed hike in the fourth quarter, even as it coincided with weaker wage data. That’s likely to keep the greenback supported, especially against rate sensitive currencies,” Harvey said.Pre-data, the greenback was already heading for a 12-week winning streak after hitting its best level in about 11 months earlier in the week. The euro, meanwhile, was heading for a record 12th week of declines against the dollar, compounded by the further gains by the greenback.Ten-year U.S. Treasury yields rose to 4.88% after climbing 55 basis points in a five-week-long selloff that has dragged prices for Treasuries to 17-year lows, and capped the appetite for risk-taking worldwide.After talk of oil hitting $100 a barrel, crude was down 0.4% at $83.72, thought still facing its steepest weekly decline since March, as markets worried that higher for longer rates would crimp global economic growth and hit fuel demand.News that Russia’s government was lifting a ban on pipeline diesel exports via ports also dampened oil prices.Euro zone bond yields gained, while the closely-watched gap between German and Italian borrowing costs – an indicator of stress in Italian finances – hit its highest since March.Global bond funds posted massive weekly outflows.The MSCI All-Country stock index turned lower. It lost about 8% since its July peak, leaving it about 7% ahead for the year.In Europe, the STOXX 600 index also lost its earlier gains to turn down 0.1% after the U.S. data. It is on course for its third consecutive week of losses after hitting a six-month low this week, slashing its gains for the year to 4%.YEN WATCHMSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.85%. Tokyo’s Nikkei was down 0.3%.Another round of bond selling would probably propel the dollar further along a weekly winning streak that is already its longest ever against the euro. The dollar index is up 12 weeks in a row, equalling a streak that ran from July to October 2014.The run-up has the euro, at $1.049, pinned near an 11-month low, and sterling, down 0.6%, not far from a seven-month trough.The dollar index was up 0.5% at 106.91.”A push through 107 would provide technical evidence of trend continuation,” said Capital.com analyst Kyle Rodda.Japanese money-market data showed no anomalies of a kind that might have accompanied intervention. But the move was eye-catching enough to keep traders on guard.The yen was last trading at 149.43.Gold dipped 0.3% to $1,813 an ounce after nine days of losses driven by rising global bond yields. [GOL/] More

The $25 trillion U.S. Treasury market is bearing the brunt of the upheaval, with rising yields adversely impacting stock investors and pushing the S&P 500 index into its fifth consecutive weekly decline. The yield on the 10-year Treasury bond set by the Federal Reserve recently surged to a 16-year high of 4.8 percent, triggering a 1.6 percent fall in the S&P 500.Market analysts from MUFG Securities attribute these patterns to robust economic data prompting higher growth expectations and persistent inflation concerns. These factors are driving interest rates upward, highlighting the increasing costs of servicing U.S.’s substantial debt pile and ongoing budget deficits.Adding to the market’s unease is political instability marked by Kevin McCarthy’s recent ousting as House Speaker, a near-government shutdown and looming fears of a debt default. These developments are further intensifying economic uncertainty, along with fluctuating oil prices and a sharply appreciating dollar.The September jobs report is anticipated to significantly influence market trends, adding another layer of complexity to an already volatile situation.Despite the financial turbulence, there are some positive signals emerging from corporate America. Better-than-expected corporate profits are offering a glimmer of hope amidst the market turmoil, potentially providing some respite for investors in an otherwise challenging environment.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

Nonfarm payrolls increased by 336,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for August was revised higher to show 227,000 jobs added instead of the previously reported 187,000.Economists polled by Reuters had forecast payrolls rising by 170,000 jobs. Estimates ranged from 90,000-256,000 jobs. The larger-than-expected increase was despite the tendency for the initial September payrolls print to be biased lower because of seasonal adjustment issues related to the return of education workers after the summer break.MARKET REACTION:STOCKS: S&P 500 futures fell and were last down 0.9%BONDS: The yield on 10-year Treasury notes rose and was last at 4.87%FOREX: The dollar index gained 0.5% to 106.90 COMMENTSJOE MAZZOLA, DIRECTOR OF TRADING AND EDUCATION, CHARLES SCHWAB, SAN FRANCISCO “Not only was this kind of a blowout hot number, basically double what the Street expected, but there was a couple of really interesting items to pull from the report.“One of the bigger items would be the revision trend has turned. We had gotten used to seeing a hotter print but then OK, you take that with a grain of salt because we’re revising down, when we’re going to get the next two reports. But here we go, we saw a revision of 119,000 jobs added back to July and August.“That’s encouraging about the health of the labor market, but it’s not going to help bond dip buyers by any means just because the yields are just going to continue to ratchet up.” STUART COLE, CHIEF MACRO ECONOMIST, EQUITI CAPITAL, LONDON”We had already been given hawkish comments from some Fed officials this week. Add in today’s numbers and I think consensus will be for another hike by year end.””If we get a stronger inflation report next week it could be a difficult time for the markets.”GENNADIY GOLDBERG, HEAD, U.S. RATES STRATEGY, TD SECURITIES USA, NEW YORK“Definitely a very strong number. There are very few blemishes on it. Overall, this is still showing strength in the economy.”“The immediate market reaction was a massive further jump in rates. What this does is continue to increase the fears that higher interest rates are going to slow the economy.”“It will be interesting to see how the Fed actually takes this. You’ve seen some of them suggest that you should start to see a slowing in hikes because the market is doing a lot of the tightening job for them.“We’ll see how much tightening the market does for the Fed, but I think a run at the 5% mark in 10-year yields may be inevitable if the data continues to hold up like this.”TIM GHRISKEY, SENIOR PORTFOLIO STRATEGIST, INGALLS & SNYDER, NEW YORK, NY“The economy is stronger than expected with more people being hired and higher wages than expected. All of this potentially is inflationary. This may encourage the Fed to raise interest rates again.”“The Fed focuses on the actual inflation number but the inflation numbers are influenced by a number of factors and a major factor is payrolls. The Fed doesn’t want to send the economy into a recession but it wants to slow growth. The payroll numbers are potentially inflationary which is the opposite of what the Fed wants.”“This is a big surprise. It can always get revised down and we won’t know that for another month. We’re at a point the Fed is slowing their rate increases. This may cause it to change that strategy and increase rates again.””On the other hand, inflation has been slowing and may continue to slow. Payrolls are not the only factor. And for the Fed, having a strong economy is a good thing long-term, as long as it isn’t inflationary.”JASON PRIDE, CHIEF OF INVESTMENT STRATEGY AND RESEARCH, GLENMEDE, PHILADELPHIA”The headline numbers were meaningfully ahead of expectations and there were some pretty strong upward revisions in both July and August as well.””Having said that, the unemployment rate was relatively flat and the average hourly earnings only came in at 0.2%, which is in line with where it was last month. So it’s not the worst outcome on this report we could have seen.””But it’s probably going to still be perceived as a strong report that keeps pressure on the Fed to keep on the table for consideration a rate hike in November.”JR GONDECK, MANAGING DIRECTOR, THE LERNER GROUP AT HIGHTOWER ADVISORS.”It really feels like the labor market is flat lining overall and to see over 300,000 jobs created is just a big surprise.””We’re kind of stuck in a negative feedback loop that the Fed caused after its meeting a few weeks ago and it’s just a matter of shaking expectations.””Reality is the labor market is going to continue to slow down our view and in the months ahead, but the economy is not (that) terrible.”MICHAEL BROWN, MARKET ANALYST, TRADER X, LONDON    “That certainly wasn’t in the script with headline NFP smashing through all expectations. Must acknowledge however that unemployment & MoM earnings printing unchanged may take some of the shine off the headline number.”    “Clearly the labor market remains resilient, and continues to impress, despite 500bp of tightening over the last 18 months.”    “With markets now seeing another 25bp Fed hike by year-end as a roughly 50/50 chance, a hotter than expected CPI print next week could seal the deal for such a move to come in November, and spark the next leg of upside in the USD.”BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“At least wage gains came in tepid. The rest was hot. The revisions to back months is shocking, showing the first print is grossly unreliable. If the Fed is data dependent, they’re flying with a broken instrument panel.”HELEN GIVEN, FX TRADER, MONEX USA, WASHINGTON DC    “Reading the signs ahead of time the big indicator for this was JOLTS on Tuesday, posting another big upside surprise. I wouldn’t be shocked if this crazy high figure gets revised down a little bit next month, but it’s definitely a good sign for the US economy.”    “Also important to note, average hourly earnings ticked down slightly and unemployment stayed level at 3.8%, so I’d hazard a guess the Fed is pretty pleased with this morning’s release.”SIMON HARVEY, HEAD OF FX ANALYSIS, MONEX EUROPE, LONDON    “Today’s monstrous payrolls print and the upwards revision to the August numbers once again highlights the difficulty in shorting the dollar in this macro environment.”    “If it isn’t risk conditions taking a beating from a sell-off in Treasuries, its the US exceptionalism narrative supporting the dollar.”    “Given the strength in today’s employment figures, markets can’t fully discount the probability of a Fed hike in Q4, even as it coincided with weaker wage data. That’s likely to keep the greenback supported, especially against rate sensitive currencies.”     PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK“It’s quite a report. The topline number was much hotter than expected but hourly wages are cooling off nicely.”“The main number is likely to be negative for the markets. Bottom line is, this puts in question whether or not the Fed stays on hold. But we do have inflation numbers next week.”“The likelihood of a Fed hike in November has risen. This is not what the market was looking for.”RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY    “This market’s current concern is interest rates more than anything else. Numbers that suggest higher-for-longer rates will be seen as negative for equities. Longer perspective, these rates will eventually slow for the economy and hurt employment. Just how far behind it will trail is the issue. At least for today investors are concerned that rates across the curve might move higher.”    “We haven’t found a bottom yet to the selloff (in the bond market). I’m not sure it makes a huge difference with the short-term rate hikes. We’re coming to the end of short-term rate hikes probably either way – whether it’s one more or not. The bigger concern is that as the yield curve steepens, if we start to have longer-term rates that are above these short term rates, it’s going to have the same effect as if they did raise rates.”    “It’s one of the problems in a managed economy that the Fed isn’t necessarily able to dictate all the moves in the bond market. Their biggest control is really just on the front end.” More

Implied yields on contracts tied to the Fed policy rate pointed to a nearly 50% chance the Fed will lift the benchmark short-term borrowing rate a quarter of a percentage point to the 5.50%-5.75% range at its December meeting. Before the jobs report, traders had given a quarter-point rate hike then about a 34% chance. The report, expected to show non-farm payrolls increased by 170,000 in September but in fact showing employers added 336,000 jobs, also had traders paring bets on Fed rate cuts next year. Futures contracts now price in a Fed policy rate of 4.69% at the end of next year, up from the 4.59% seen before the report. “All of this potentially is inflationary,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder. “This may encourage the Fed to raise interest rates again.” More