09 October 2023
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Nonfarm payrolls surge in September

By Edward Bell

The September nonfarm payrolls report for the US surged by 336k, almost twice what markets had been expecting and its strongest print since January this year. The unemployment rate held steady at 3.8%. The jobs growth was widely spread with leisure and hospitality adding the largest number of jobs last month while accommodation/food services, government and health care all reported strong increases. Data from the household survey showed no change in the participation rate helping to keep the unemployment rate steady at 3.8%. Average hourly earnings were also steady at 0.2% m/m and 4.2% y/y. The prior two months’ jobs reports were also revised higher, showing the US labour market in persistently robust health. The headline number is likely to increase the market pricing of another rate hike from the Fed though the steady cooling in wages may help to temper the need for the Fed to go higher.

Factory orders in Germany improved in August, rising by almost 4% m/m after an 11% drop a month earlier. Electronic components were the main driver of the improvement for August. Germany’s manufacturing and export sectors will be highly dependent on global macro conditions, particularly from China and some stabilization in the data there may help to improve the outlook for industry in the Eurozone’s largest economy.

Michelle Bowman, a governor of the Federal Reserve, said that inflation was still too high and that the Fed would need “to raise rates further and hold them at a restrictive level for some time” to get inflation back to target levels. With no Fed officials showing any wavering over their commitment to the 2% target, that will keep a substantially hawkish edge to commentary from the Fed and risk further market volatility if data continues to outperform. Inflation data from the US will be the highlight of economic data this week with market expectation of a modest tick lower on the annual rate to 3.6%.

Today’s Economic Data and Events

  • 10:00 GE industrial production Aug m/m: forecast -0.1%

Fixed Income

  • US Treasuries sold off heavily in response to the September nonfarm payrolls report with the 2yr yield spiking at one point to as high as 5.14%. The moves lower were generally unwound over the rest of the day as more clarity on the data sank into markets with the 2yr yield ending the day higher by 6bps and the 10yr rising by 8bps to 4.8009%.
  • Market expectation for a November hike from the Fed has increased though is still at just about 30% for another 25bps move.
  • Bond markets generally sold off on Friday with bund yields marginally higher and gilt yields adding 3bps to 4.571%.
  • Emerging market bonds weakened at the end of last week with the Bloomberg USD index down 0.3% with broad based selling across geographies. GCC credit also sold off.


  • The dollar index fell last week for the first time since mid July though gains for peer currencies were concentrated in G3 markets. EURUSD added 0.3% at the end of last week to close at 1.0586 while GBPUSD performed even better, gaining 0.4% to 1.2237. USDJPY closed near unchanged on the week with a modest upward bias with some moves in favour of the yen mid week being offset by a 0.6% rise in the pair on Friday to 149.32.
  • Commodity currencies were resolutely weaker against the US dollar though Friday’s price action showed gains. USDCAD moved lower by 0.3% to 1.3661, AUDUSD added 0.3% to 0.6386 and NZDUSD rose 0.4% to 0.599.


  • US equity indices rose on Friday, despite the significantly stronger than expected NFP print. The Dow Jones rose 0.9%, the S&P 500 increased by 1.2% and the NASDAQ jumped 1.6%.
  • Key European equity markets moved higher on Friday. The Euro Stoxx 50 and Dax both rose 1.1% and the CAC 40 increased by 0.9%. The FTSE 100 also rose on the day, increasing 0.6%.  
  • Locally, the ADX declined 0.1% and the DFM rose 0.52%.


  • Oil prices slumped sharply last week with Brent futures down 11% and WTI down almost 9%, their largest weekly losses since March this year. Brent settled at USD 84.58/b on Friday, up 0.6% while WTI rose 0.6% to USD 82.79/b. Time spreads also eased last week with the front month spreads in Brent closing at USD 1.45/b in backwardation compared with more than USD 3/b a week earlier.
  • The US oil drilling rig count was off by 5 rigs last week to 497 with conventional plays seeing most of the pull back. The gas focused rig count increased slightly.
  • Investors cut positions in Brent and WTI speculative positions last week with Brent net length down to 7.7% of open interest while in WTI the positioning is longer. Escalating geopolitical tensions in the Middle East could raise the political risk premium in oil markets and may seem some increased long positioning.

Written By

Edward Bell Head of Market Economics

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