Recent U.S. labor market data has surpassed expectations, leading traders to adjust their predictions for Federal Reserve rate cuts in the upcoming meetings. In September, the labor market added 254,000 jobs, significantly higher than economists' forecast of 140,000 and surpassing the revised August figure of 159,000. The unemployment rate also dropped from 4.2% in August to 4.1%.
Wage growth, a key inflation indicator, increased by 4% year-over-year, aligning with August's monthly rise of 0.4%. The labor force participation rate remained steady at 62.7%. Following this data release, spot gold prices fell by $20, while the U.S. dollar index surged past the 102 mark.
Additionally, the Bureau of Labor Statistics revised July's job additions from 89,000 to 144,000 and August's from 142,000 to 159,000, resulting in a net increase of 72,000 jobs for those months. In response to the robust employment figures, traders now expect the Federal Reserve to maintain a 25 basis point rate cut in November and December, reducing expectations for a total of under 100 basis points over the next four meetings.
Earlier data indicated healthy job demand with low layoffs, supporting the notion that the job market is not cooling too rapidly. This strengthens the possibility of a 25 basis point rate cut in the upcoming Federal Reserve meeting, especially after a substantial 50 basis point cut in September. Fed Chair Jerome Powell recently addressed investor concerns, noting that the committee does not feel pressured to accelerate rate cuts.
Growth in hiring last month was primarily driven by the leisure, hospitality, healthcare, and government sectors. Analyst Audrey emphasized that the job data dispels recession fears and boosts positive sentiment towards the U.S. dollar. This report contrasts with the recent downward trend of the euro against the dollar.
Attention now shifts to the October nonfarm payroll report, which will factor in the impacts of a significant strike involving about 33,000 Boeing factory workers. Another substantial strike by U.S. dock workers concluded quickly and may not significantly affect the data. Additionally, hurricane-related disruptions in the southeastern U.S. could delay business activities.
