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Treasury Yields Retreat From 24-Year Highs After a Weak September Jobs Report

Payrolls rose by 29,000 and wage growth slowed. The 10-year yield fell to about 5.18% and the dollar slipped as traders reassessed the case for another Fed hike.

By Global Terminal Staff · · 2 min read

A sign in the grass advertising a job fair
Photo: Erik Mclean / Unsplash

Why it matters

  • The Fed's Oct. 27–28 decision now hinges more on inflation than on a labor market that looks softer than thought.
  • Revisions show hiring in July and August was 60,000 jobs weaker than first reported.
  • Lower Treasury yields ease pressure on mortgage rates and corporate borrowing costs.

Analysis: this piece includes our interpretation of the facts reported.

The September jobs report gave bond markets some relief on Friday.

U.S. employers added 29,000 jobs last month, the Bureau of Labor Statistics said, well below the roughly 90,000 economists had forecast, according to CBS News. The unemployment rate rose to 4.2% from 4.1%.

What changed in the data

MeasureSeptemberAugust
Nonfarm payrolls+29,000+133,000 (revised from +162,000)
Unemployment rate4.2%4.1%
Average hourly earnings, month+0.1%+0.3%
Average hourly earnings, year+3.0%+3.1%

Source: U.S. Bureau of Labor Statistics. August wage figures are as first reported.

The revisions matter as much as the headline. July now shows a loss of 10,000 jobs, and August's gain was cut by 29,000. Combined, the two months were 60,000 jobs weaker than previously reported. Payroll growth has averaged 45,000 a month over the past year, the BLS said.

Wages also cooled. Average hourly earnings rose 0.1% to $37.81, short of the 0.3% gain economists expected, Benzinga reported.

How markets moved

The 10-year Treasury yield fell 7 basis points to about 5.18%, according to Trading Economics. It had climbed above 5.34% earlier this week, the highest level since 2002. The 2-year yield, which is more sensitive to Fed policy, eased 0.07 percentage point to 4.74%.

The dollar index slipped 0.23% to about 101.87, Trading Economics said, as the report tempered expectations of higher U.S. rates. Stock futures rose after the release, TheStreet reported.

The Fed question

The Federal Reserve raised its benchmark rate in September for the first time in more than three years, CBS News noted, leaving its target range at 3.75% to 4.00%. Before Friday's report, fed funds futures implied a 26.4% chance of another quarter-point increase at the Oct. 28 decision, according to Investing.com's Fed Rate Monitor.

Inflation is the other half of the decision. The core personal consumption expenditures price index, the Fed's preferred inflation gauge, rose 3.0% in the year to August, according to data released Sept. 30, 24/7 Wall St. reported. Part of that cooling came from a change in how the government measures some prices, the outlet noted, an effect that will not repeat.

A soft jobs report and cooler wage growth make the case for waiting. But with inflation still well above the Fed's 2% goal, one report is unlikely to settle the debate.

Sources