September Labor Data Boosts Soft-Landing Hopes

Yields surge after blowout jobs report. Markets re-evaluated bets on the size of upcoming Fed rate cuts after stronger than expected September labor data. Futures-implied odds of a 25bp cut in November climbed to ~93%, compared to ~68% yesterday. UST yields climbed ~7-22 bps across the long end of the curve, with the 2-year UST yield ending at ~3.92% and the 10-year UST yield ending at ~3.97%. Equities climbed on the data, with the S&P 500 up ~0.90% and the NASDAQ up ~1.22% on the day.

Job growth exceeds expectations. Data released today showed stronger than expected labor results in September. Nonfarm payrolls grew 254,000 during the month vs. 150,000 survey expectations and August’s 159,000 print (upwardly revised from 142,000). In addition, the unemployment rate declined slightly from 4.2% to 4.1%. Viewed alongside private payrolls and job openings data released earlier this week, the data alleviated some concerns about a prolonged labor market deterioration. 

Dockworkers strike suspended until January 15th. Unionized dockworkers on the east coast and the United States Maritime Alliance (USMX) reached a wage agreement today, suspending the strike that began Tuesday until at least January 15th, 2025. Now, the two groups will need to work out final details of a longer-term agreement that addresses the union’s concerns about the use of AI and automation at shipping ports. Earlier this week, economists at Oxford Economics estimated that a prolonged dockworkers strike could cost the US economy $4.5 – $7.5 billion per week.