US labor market numbers for October rise again

Employment in the US rose more than expected in October as headwinds from the spike in COVID-19 infections eased in the summer, suggesting that economic activity is picking up again early in the fourth quarter.

As the Ministry of Labor announced on Friday, the number of jobs outside of agriculture rose by 531,000 in the past month. The September data was revised upwards to show 312,000 new jobs instead of the 194,000 previously reported. Economists polled by Reuters had forecast an increase in the number of jobs by 450,000. The labor shortage persisted even after the federal government-funded unemployment benefits expired in early September and schools reopened.

MARKET REACTION:

STOCKS: S&P e-mini futures extended their slight gains, rising 0.43%, indicating a firm open on Wall Street.

BONDS: The yield on the 10-year benchmark note rose to 1.5334%. The yield on two-year government bonds rose to 0.4405%.

FOREX: The dollar index stayed firm, rising 0.23%.

COMMENTS:

EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK "Today's numbers show that the US economy is accelerating and that the labor market recovery, while protracted, will not be permanent. This type of report will look extremely positive affects the stock markets, but it doesn't really change the Fed's mindset. The currency markets are going to be a little trickier, and you will see much more interesting divergences as we get into the tapering realm. "

RICK MECKLER, PARTNER AT CHERRY LANE INVESTMENTS IN NEW VERNON, NEW JERSEY

"The upside is that investors were concerned about a slowdown in the economy. We have seen signs that it may slow down, especially given the disruptions in the supply chain, but the data (on non-farm employment) suggests it that the economy is on track. Investors will take this as a positive sign and continue to invest in equities. The flip side of the coin, of course, is that it won't reduce the inflation potential. But that seems to be a problem for another day for equity market investors be when bond rates fail.

"It's hard to understand how we can have a high unemployment rate and still have a labor shortage. That indicates a real disparity."

DAVID PETROSINELLI, SENIOR TRADER, INSPEREX, NEW YORK

"The headline numbers have been a bit disappointing in the past few months, so it's a catch-up number. I don't think it will change much of what the Fed will do in 2022 when rates are raised. But it's a sigh of relief after the delta variant has dampened employment in recent months and that is now behind us.

"I don't know if that will change the picture dramatically because the tapering was announced on Wednesday. The only problem is still labor force participation. It is still a problem that people don't necessarily re-enter the labor market fully. Participation will rise, but it is still one of the Achilles heels of the labor market, participation is still lagging and that will be a headwind.

"That tells me that we are in a range of 1.5% to 1.7% for the 10-year bond. Anything that will break out up or down has to be an announcement or series of announcements or data that will take us away from it. The market was expecting some spike in new hires. The market is happy with where rates are and we have to wait for a tipping point. "

SIMON HARVEY, SENIOR FX MARKET ANALYST, MONEX EUROPE, LONDON

"Market expectations for a strong job report were confirmed by the release, which not only brought a positive surprise to net employment in October, but also a positive correction to disappointing September numbers."

"Given that the Fed's future rate targets are largely tied to the recovery in the labor market, today's positive employment data caused the US 2-year yield to rise more than 2 basis points on the day before weakening a little. The widening of the yield spread at the front end of the market sparked a reaction in the currency markets, with the dollar gaining ground across the G10. "

"We warned of an asymmetrical risk before today's payroll release, as the September data was revised down due to the early survey period. So we didn't just expect an upward revision of last month's data, we left also anticipate October net employment numbers would be strong given the tailwind from improving COVID conditions. Looking ahead, today's payroll release is likely to keep the dollar high until economic conditions improve and the central bank will take a more restrictive stance again towards the end of the year. "

MICHAEL SHELDON, CHIEF INVESTMENT OFFICER, RDM FINANCIAL GROUP, WESTPORT, CONNECTICUT "The headline numbers are certainly quite positive for the markets and give the impression that the economy is in good shape on the way into 2022, and they convey too confidence that consumers are in a strong position to spend money and support the economy. "

"One worrying factor is the activity rate, which has not improved, suggesting that the labor market may not be as tight as it appears at first glance."

"The solid employment report tells the market that the Fed has made the right decision with its tapering plans and that it is time for the Fed to slow down."

JJ KINAHAN, MARKETING MANAGER, TD AMERITRADE, CHICAGO

"It's hard not to like this report, it's really good overall, especially if you look at it from a private sector perspective. It's 531,000 but 73,000 government jobs have been lost, so the private sector does absolutely well The one number that caught my eye in particular and that I find really incredible is that of the transport sector, which is above February 2020 levels, which is really amazing. All we're hearing about in transport right now is these Whole supply chain issues, but at the same time we're hiring a hell of a lot more people here. Warehousing and warehousing has increased, transit and ground transportation has increased, air transportation has increased, trucking has increased, the only thing that has gone down was them Couriers and messengers, so these are really the jobs you are getting into. That was by far the best I saw on the report. "

"Yes, there are some problems in the supply chain, but the demand is so great that they still put people on this problem and you have to move goods, so this bottleneck will eventually resolve itself."

ZACHARY GRIFFITHS, MACRO STRATEGY, WELLS FARGO, CHARLOTTE, NORTH CAROLINA

"I would think that this number would put some upside pressure, especially on the lower part of the (US Treasury) curve, as we think economic numbers will have a bigger impact from here after the US chairman Fed Powell indicated that they were willing to be patient and took on a dovish tone earlier this week. You're as good as done on the inflation front and the focus is on maximum employment, so I'd think that a number how this could bring back some of the market prices we saw yesterday when the Bank of England surprisingly held rates. "

PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO

"It seems to be a very good report. The participation rate has risen; it was certainly far above expectations. You have corrected upwards in recent months. The unemployment rate is falling again. There is not much to complain about with the employment report.

The market reaction has not been very violent. And when I look at the fixed income market, I don't see much there either. The 2/10 (yield) spread has increased a little, but not by much.

PETER CARDILLO, MANAGING MARKET ECONOMY, SPARTAN CAPITAL SECURITIES, NEW YORK

"The unemployment rate has fallen to 4.6%, but this is likely due to the fact that the activity rate has fallen.

"Hourly wages are a little higher, but nothing to take the wind out of this positive report. That shouldn't have any impact on returns.

"The bottom line is that it is a good report that shows an acceleration compared to the previous month.

"It shows that the labor market is recovering to such an extent that we can expect even greater growth in the next month when more people return to the labor market."

"If these numbers continue at this rate, we could probably reach full employment by the end of the first quarter."

TOM PORCELLI, US SENIOR ECONOMY, RBC CAPITAL MARKETS, NEW YORK

"Everything has been going in the direction you would want. I think that shows some real fundamental strength. The interesting thing is that you don't need this payroll report to see that because there was a bunch of other labor market data that have made that clear, be it ADP or the motions or the confidence indicators focused on the work environment, I mean, in the last few months we have seen a real strength here, so in a way I am referring to this payroll report as a sort of catching up consider, for he was the straggler. "

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

"A welcome surge in new hires has propelled the US dollar to a new high for the year. Still, the data could provide limited boost to the dollar as the employment rate has not improved. Participation rates remained at 61.6%, suggesting that people are reluctant to return to work because of persistent health concerns. The market wants to see people move off the sidelines and return to work. "

THOMAS HAYES, EXECUTIVE MEMBER, GREAT HILL CAPITAL LLC, NEW YORK

"We couldn't get more positive news. Of course, the market had risen sharply before the news from Pfizer (NYSE: PFE), but now it really seems to be the end of the pandemic. The next phase of the labor recovery will be one increase in the labor force participation rate, and the Pfizer drug will be the catalyst for that. "