US Non-farm Payrolls Rise to 261,000 in October vs. 200,000 Expected!

U.S. employers continued to add to their ranks at a strong pace at the start of the fourth quarter.

According to the Department of Labor, the economy added 261,000 Non-Farm Payrolls (NFP) in October, versus the 200,000 expected, following an upwardly revised increase of 263,000 in September. The jobless rate, meanwhile, inched up to 3.7% from 3.5%, one-tenth of a percentage point above estimates.

So, let’s take a look at the expected reaction of the markets, as well as the likely consequences of the NFP release.

Dow Jones futures rallied after the jobs report

The stock market reacted extremely positively to job growth in the U.S., despite the divergence in forecasts.

Dow Jones ($DOW30) futures rallied 250 points after the Labor Department’s pivotal October jobs report showed stronger-than-expected growth.

The NASDAQ ($NAS100) gained more than 100 points after the data release, though it fell heavily in the run-up to the report.

The SP500 ($SPX500) was more subdued and has already started to pull back.

Nevertheless, even if these gains do sustain through the opening bell and trading session to the weekend, it remains unlikely that markets will have an overall positive week. The S&P at almost 5% lower, and the Nasdaq at just under 7% lower, are shouldering heavy losses so far on the week. Therefore, the dynamics in general could be negative starting next week, as previously predicted.

The US Dollar is having a difficult time gathering strength despite the NFP report

With the immediate reaction, the U.S. Dollar Index erased a portion of its daily losses and was last seen trading at 112.55, where it was down 0.37% on a daily basis. Nevertheless, the U.S. dollar could retain leadership in the currency market.

This can happen because resilient labor demand is unlikely to provide cover for the Fed to downshift the pace of hikes immediately. In addition, the terminal rate could continue to drift higher on hawkish repricing of the FOMC monetary policy outlook, pushing up U.S. Treasury yields along the way.

Conclusion

Today’s NFP is a sign that America’s job machine is still firing on all cylinders despite heightened economic uncertainty due to rising interest rates and persistently high inflation.

The Fed is deliberately trying to boost unemployment to tame inflation, in part by destroying some demand in the economy. But today’s data show that its actions are not yet having the desired effect, as the labor market remains extremely tight by historical standards.

This situation may prompt policymakers to stay on a hawkish hiking path over an extended period of time in their quest to restore price stability.

Summary

• October Non-Farm Payrolls (NFP) showed an increase to 261,000.
• The Dow Jones, S&P500, and Nasdaq are all moving slightly higher.
• The Euro and Pound are both jostling for position against a U.S. Dollar that still remains somewhat defensive.
• This situation may prompt policymakers to stay on a hawkish hiking path over an extended period of time in their quest to restore price stability.