US: Jobs report better than it looks. Yields jump.

3 min
Dan North
Dan North Senior Economist for North America

The economy created +134k jobs in September compared to +180k expected, but there were two mitigating factors. Hurricane Florence kept some people off the payrolls, and the prior two months were revised up a sharp +87k. The unemployment rate dropped from 3.9% to 3.7%, the lowest since December 1969. Wage growth slipped to +2.8% y/y from last month’s +2.9%, which was the highest in nine years. However, weekly wages are growing faster at +3.4% y/y. The ISM non-manufacturing index posted a blistering 61.6 points, just shy of the record 62.0 set 21 years ago. New orders rose +4.5 points to 65.2, and the employment component rose to a record high 62.4. Fed Chair Powell reiterated the need for more interest rate hikes in two speeches. The combination of low unemployment, strong ISM, and a stiff Powell caused the yield on the 10-year Treasury to jump +18bp on the week to 3.23%, the highest in seven years.