US September jobs report beats analyst expectations

The US economy added 254k jobs in September, coming in far above forecasts, with unemployment dropping to 4.1%, according to data from the Bureau of Labor Statistics over the weekend. Unemployment also fell to 4.1% during the month, coming down from a three-year high of 4.3% in July.

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Sector breakdown: Job growth in the US was led by the leisure and hospitality sectors, with nearly 70k new positions added in restaurants and bars. Healthcare also posted gains with 45k new jobs. Meanwhile manufacturing, mining, oil, retail, and other sectors remained flat for the month.

“Smashing” expectations: The September data far exceeded the 140k new jobs figure cited in a Reuters poll, with the Financial Times saying the figures “smashed” expectations and led traders to reassess their expectations of the US Federal Reserve’s monetary easing pace. Traders are now penciling in a smaller 25 bps reduction at the Fed’s next policy meeting in November. The higher-than-expected employment growth reinforces economists’ hopes that the US Federal Reserve’s strategy is placing the US economy on track for a “soft landing,” the salmon-colored paper reported.

Strong outlook for the US economy: “You couldn’t paint a prettier picture of the job market and broader economy. If this report doesn’t silence the recession fearmongers, then nothing will,” the Financial Times quotes chief economist at Moody’s Analytics Mark Zandi as saying. Meanwhile, senior US economist at Vanguard Josh Hirt has described the latest jobs reports as “a bit of a game-changer.” The boost in perceptions on the US economy is also expected to boost VP Kamala Harris’ standing against Donald Trump ahead of November’s presidential elections with the pair currently head-to-head in polls.

Bond markets paint a different picture: US Treasury yields rose after the job numbers were published, with the two-year yield rising to a one-month high of 3.93%. Stocks also rallied, with S&P 500 closing up 0.9% on Friday, marking its fourth straight week of gains. Bond traders are now concerned that the higher-than-expected jobs figures are putting the US economy on track for a “‘no landing’ scenario — a situation where the US economy keeps growing, inflation reignites and the Federal Reserve has little room to cut interest rates,” Bloomberg says. The data “spoiled” a rally in US Treasuries that had driven yields down, with bond markets reacting to fears that the Fed’s monetary easing cycle is “disconnected” from the market.

All eyes on inflation now: Queens’ College, Cambridge President Mohamed El Erian told Bloomberg TV the strong employment figures require that the Fed “renew its focus” on keeping inflation in check. “This is not just a solid labor market, but if you take these numbers at face value, it’s a strong labor market late in the cycle,” El Erian said. The Bureau of Labor Statistics is set to release its Consumer Price Index for September this Thursday, 10 October.

MARKETS THIS MORNING-

Asia-Pacific markets are solidly in the green in early morning trading today, Japan’s Nikkei rising more than 2% and Hong Kong’s HSI rising nearly 1%. South Korea’s Kospi and Australia’s ASX 200 are also in the green. Mainland China’s markets are still closed for the Golden Week holiday and will reopen tomorrow.

THE CLOSING BELL-

The EGX30 rose 1.2% at Thursday’s close on turnover of EGP 3.9 bn (5.8% below the 90-day average). Regional investors were net sellers. The index is up 27.4% YTD.

In the green: Elsewedy Electric (+19.6%), Eastern Company (+3.6%), and Egyptian Kuwaiti Holding -EGP (+3.2%).

In the red: Credit Agricole (-1.2%), E-finance (-1.0%), and Beltone Holding (-0.9%).