Yields jump on hot payrolls report. Treasury yields soared 5-8 bps to intraday highs in the aftermath of today’s stronger-than-expected payrolls print. The move partially reversed over the remainder of the session as markets digested the data, with the 2-year yield closing 3 bps higher at 4.37% (up 2 bps on the week) and the 10-year yield closed 1bp higher at 4.78% (up 6 bps on the week). Meanwhile, equities edged lower, with the S&P 500 and NASDAQ closing 0.38% and 0.29% lower, respectively.
Surprise payrolls report highlights robust labor market. August nonfarm payrolls data showed 162k jobs added, surging past estimates of 55k. July’s initial 23k decline was also revised to a gain of 21k jobs, bringing the two-month net revision to 55k jobs added. The unemployment rate held steady at 4.1%, in line with estimates, while the labor force participation rate edged up to 61.6%. Job growth was led by the leisure and hospitality and education industries, with manufacturing also adding the most jobs since 2023. Financial activities and information sector jobs declined by a combined 34k. Adam Schickling, senior economist at Vanguard, said “this report is unlikely to materially change the Federal Reserve’s outlook on its own. The labor market remains resilient enough to keep the focus on inflation.” Markets will look to next Friday’s CPI report for an updated read on price pressures ahead of the September FOMC meeting.
Hammack reiterates hawkish stance. Cleveland Fed President Beth Hammack posted on LinkedIn today, calling inflation “too high” and adding that, “right now, what I’m hearing is that it’s time to act.” She pointed to both data and conversations with community members in her district as evidence that current monetary policy is not adequately restrictive, citing an Ohio manufacturer facing double-digit inflation in input costs. Hammack was one of three policymakers to dissent from last month’s FOMC decision to hold rates, favoring a 25bp hike. The next Fed meeting takes place September 15-16, with the market currently pricing in a 62% chance of a rate hike, up from 51% yesterday.