US jobs report smashes expectations

While some of the increased hiring is just a post-Covid normalisation, it puts further pressure on the Federal Reserve.

06 October 2023

The US jobs report for September smashed all expectations with 336k new additions to the workforce seen verses a forecast of a much more modest addition of 171k. This hot jobs report saw strong gains in the service sector with hospitality recording big increases in new hires. This augers well for the sector as obviously increased hiring reflects buoyant demand seen still but it would be remiss to ignore that some of this re-hiring is just normalisation back to levels pre-pandemic. It certainly is not reflective of an economy that is slowing perhaps as quickly as the Federal Reserve (Fed) hopes for and even if wage growth increased less than expected, the odds of a further hike from the central bank has to be higher than it was prior to this report (and it was high already). Bond bears are still in full control with yields across the Treasury curve pushing to near term highs. This is reflected in a level of angst for equity markets which remain under pressure with the higher for longer narrative now having to be finally accepted. The Fed must also be agonising over how much they need to continue to do before the economy succumbs to higher and higher rates.