Nonfarm payroll employment in the U.S. increased by 531,000 in October and the unemployment rate fell 0.2 percentage points to 4.6 percent, the Bureau of Labor Statistics reported today. Employment rose sharply in leisure and hospitality, professional and business services, manufacturing, and transportation and warehousing. Employment declined in public education.
U.S. futures rose and the three major averages hit new record highs as the market report surprised on the upside, beating market consensus.
Job growth and wage increases
The US economy added 531,000 jobs in October, more than the expected 450,000, while wage pressures remained under control. Average hourly earnings rose 4.9 percent in October on an annualized basis, which was in line with market expectations. Overall, nonfarm employment has increased by 18.2 million since the April 2020 peak, but is 4.2 million below pre-pandemic levels.
Labor shortages continue to weigh, even with the expiration of federally funded unemployment benefits and the reopening of schools. Some investors believe the shortages could get worse.
Euro loses to dollar
Meanwhile, the interest rate market has begun to price in the possibility of the Fed raising interest rates by 15 basis points by June 2022, which could translate into a stronger US Dollar. EUR/USD at one point approached 1.1500, its lowest level since July 2020.
Such a low value of the euro in relation to the dollar may also be derived from the divergence in the approach of the European Central Bank and the Federal Reserve to interest rates. The first bank does not intend to raise them in the near future, and the Fed may make such a decision.
Records on stock exchanges in the USA
On the stock market we can observe further records set by the American stock indices. Contract on S&P 500 seems to be gaining over 0.5 per cent today and is rising to 4700 points. The Nasdaq 100 can record a similar scale of growth, as it rises by 0.49 percent, to 16400 points. The Dow Jones Industrial Average, on the other hand, seems to exceed 36100 points. Interestingly, U.S. Treasury bonds also seem to be gaining as stock market indices rise. Yields on 10-year bonds fell below 1.5 percent for the first time in a month, while yields on 30-year bonds fell below 1.9 percent for the first time since September 23.
The fall in yields of US bonds also seems to be supporting the prices of gold and silver. An ounce of the yellow metal returned above USD 1,800, while silver was above USD 24. There seems to be a "buy everything" sentiment on the market, which is a phenomenon that can be remembered from the times when QE programs were implemented, but does not seem to be characteristic of the period of tapering or possible interest rate increases.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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