Daily Market Color

Stocks, Treasurys Edge Higher After Mixed Jobs Report

Payrolls, Wages Miss Expectations Despite Labor Market Tightening

The Labor Department’s employment report for October missed the market predictions for labor market growth despite posting the highest payroll gains of the year.  There were 261,000 seasonally-adjusted new nonfarm payrolls recorded last month as Americans went back to working after Hurricanes Harvey and Irma, however the figure was more than 50,000 lower than median forecasts.  Helping to soften the blow, there was an upward revision of 90,000 jobs to the previous two months’ figures, bringing the average over the last three months to +162,000.



The unemployment rate showed continued tightening of the overall US labor market, declining to 4.1% last month – the lowest level since 2000.  Just in the first ten months of 2017 alone, the jobless rate has now declined by 0.7% (4.8% in January).  Also noteworthy was the drop in the Underemployment (U-6) rate, which fell to 7.9% in October, matching the lowest rate for this index since 2001, and down from its peak of 17.1% reach in October 2009. Wage growth stood as the largest disappointment in the job data released, as average hourly earnings were unchanged last month (+0.2% expected), bringing the YoY increase to 2.4% (+2.7% expected).  In addition, the labor force participation rate fell to 62.7% in October, its lowest reading in the past five months.



Volatility Remains Absent from US Financial Markets

US Treasurys were unfazed by the labor data, with yields/swap rates holding near unchanged for the session.  In a week with lots of market-impacting events that also featured domestic and foreign central bank meetings, a tax reform proposal and a nomination for the next Fed Chair, the 10-year note yield declined roughly 8 basis points and is poised to finish the day near 2.34%.  All three major US stock indices are trading 0.1%-0.6% higher for the session, highlighted by a near 3% gain in Apple Inc.’s shares after the company’s earnings report easily exceeded expectations.  The S&P 500 has now posted eight weekly gains in a row, its longest such streak in four years.  In commodities, crude oil futures capped this week with a 2% gain, bringing the price for a barrel of WTI to $55.65 – the highest mark in nearly two and a half years.



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