Market expectations for a Federal Reserve rate hike in October eased after the latest U.S. nonfarm payrolls report. Traders cut back their hawkish bets, and swaps tied to Fed meeting dates no longer fully price in one complete rate increase this year. Allianz chief economic adviser Mohamed El-Erian said the labor market figures came in as a surprise: the U.S. added just 29,000 jobs in September, the unemployment rate rose to 4.2%, and hourly wages increased only 0.1% month over month. Revisions also lowered July and August payroll figures by about 60,000 jobs combined. On the supply side, labor force participation climbed to 61.8%, which he described as a more encouraging development. Taken together, the data reinforced the effect of recent remarks from Fed officials and pointed to softer market expectations for an October rate increase.
After the U.S. nonfarm payrolls report was released, traders scaled back bets that the Federal Reserve will raise rates in October.
Swaps tied to Fed meeting dates showed that markets no longer fully price in one complete rate hike this year.
Mohamed El-Erian, chief economic adviser at Allianz, said the U.S. labor data came as a surprise: the economy added only 29,000 jobs in September, the unemployment rate rose to 4.2%, and hourly wages increased just 0.1% month over month.
He also said payroll figures for July and August were revised down by about 60,000 jobs. On the supply side, labor force participation rose to 61.8%.
In his view, the report reinforced the effect of recent comments from Fed officials, with market expectations for an October rate hike continuing to cool.
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