Treasury yields fall due to slowdown in U.S. employment... October interest rate hike bets also retreat

Employment increased by 29,000 in September... The figures for July and August were also lowered by a total of 60,000 people.

2-year bond 4.725%, 10-year bond 5.182%… Stock index futures rise immediately after hiring announcement

As US employment growth in September fell below market expectations, government bond yields fell and stock index futures rose. As employment and wage growth slowed, expectations grew that the Federal Reserve would not rush to raise interest rates further in October.

In the employment report released by the U.S. Bureau of Labor Statistics (BLS) on the 2nd (local time), the number of non-farm jobs in September increased by 29,000 from the previous month. It was significantly lower than the market expectation of 90,000 people compiled by Reuters. The unemployment rate increased from 4.1% in August to 4.2% in September.

After the announcement, interest rates fell in the bond market. In the market trend reported by Reuters, the U.S. 2-year Treasury bond yield, which is sensitive to the Federal Reserve's policy interest rate outlook, fell by 6bp (1bp = 0.01% point) to 4.725%. The 10-year interest rate was also lowered by 5 basis points to 5.182%. In the same report, the probability of an interest rate increase in October reflected by the market once fell to 12%, but later rose to 19%.

Stock index futures also rose. As of 8:31 a.m. Eastern time, 9:31 p.m. Korean time, S&P 500 futures were up 0.79% and Nasdaq 100 futures were up 1.01%. This appears to reflect expectations that weaker-than-expected employment indicators will ease the burden of additional austerity measures.

This report also lowered the employment trend for the previous two months. Employment in July was revised from an increase of 21,000 to a decrease of 10,000, and in August it was revised from an increase of 162,000 to an increase of 133,000. The total downward adjustment for two months is 60,000 people. This means that the employment rebound in August was not as strong as initially announced.

Wage growth also decreased. The average hourly wage in the private sector was $37.81, up 0.1% from the previous month and 3.0% from the same month last year. Private employment increased by 46,000, and government employment decreased by 17,000. The employment spread index of 250 private industries fell from 57.6 in August to 49.0 in September. Falling below the baseline of 50 means that there were more industries in which employment decreased than those in which employment increased.

It is difficult to immediately interpret the rise in unemployment as a signal for large-scale layoffs. In a separate household survey, the number of employed people increased by 406,000, and the economically active population, which includes the employed and unemployed, increased by 485,000 people. The economic activity participation rate also increased from 61.6% to 61.8%. As the number of employed people increases, the number of people participating in the labor market appears to be growing faster.

The Federal Reserve announced its intention to suppress high prices by raising the Base Interest Rate to 3.75-4.00% in September. This employment report may serve as a basis for lowering the need to hasten additional increases, but it is not data that confirms price stability. The key to the next decision will be how the price index, which will be released ahead of the Federal Open Market Committee (FOMC) on October 27-28, shows trends along with the slowdown in employment.