US non-farm payrolls in September exceeded expectations, with a slight increase in the unemployment rate. The market has slightly cooled on expectations of a rate cut by the Federal Reserve in December.

According to a report released by the U.S. Bureau of Labor Statistics on Thursday, the non-farm payroll employment in the U.S. increased by 119,000 in September, higher than the revised decrease of 4,000 in August, and above the market expectation of 50,000 new jobs. The unemployment rate in September rose slightly to 4.4%, the highest level since October 2021, compared to the expectation of 4.3%. Average hourly earnings in September increased by 0.2% from the previous month and by 3.8% from the same period last year, with expectations of 0.3% and 3.7% respectively. The unexpectedly positive data will strengthen the stance of hawkish members of the Federal Open Market Committee, who have consistently warned the Fed against cutting rates too quickly. Meanwhile, minutes from the Fed's October meeting showed that policymakers are leaning towards no rate cut in December. Traders have lowered their expectations for a rate cut by the Fed next month after this news was released. Interest rate swap traders currently estimate the probability of a rate cut by the Fed next month at only 35%, down from 43% over the weekend. The increase in new jobs in September mainly came from traditional industries, with the healthcare industry adding 43,000 jobs, roughly in line with growth over the past year. The bar and restaurant industry added 37,000 jobs, and the social assistance industry added 14,000. However, the transport and warehousing industry decreased by 25,000, and the federal government (a major contributor to job growth) decreased by 3,000 jobs, accounting for part of the 97,000 job losses for the year. Overall, the report shows that the U.S. labor market in the fall remains consistent with the whole year - slow but steady, with businesses reluctant to hire a large number of new employees or lay off existing ones during a period of unusual economic volatility sparked by aggressive policy actions in the Trump administration. Seema Shah from Principal Asset Management noted that the interpretation of this report varies across markets. The stock market welcomed the data as it showed better-than-expected employment figures, indicating a solid economic foundation. The bond market, on the other hand, is pleased with the rise in the unemployment rate and the slowdown in wage growth, which could help maintain the possibility of a rate cut by the Fed in December. Shah stated, "Today's employment report is unlikely to prompt the Fed to cut rates in December. In any case, a pause in rate cuts in December should not be seen as a major misstep. While subdued consumer confidence highlights concerns about job security, the labor market conditions, while soft, are not in a recession, providing the Fed with room to reassess the economic background and act decisively only after obtaining sufficiently convincing data." In addition, initial jobless claims in the United States fell to 220,000 last week, showing that despite economic uncertainties, employers are still retaining existing staff. As of the week ending November 15, initial claims decreased by 8,000. According to data released by the Labor Department on Thursday, continued claims for unemployment benefits increased to 1.97 million last week. Despite recent layoffs announced by several large companies including Amazon and Target, applications for unemployment benefits have remained relatively moderate. The four-week average also slightly decreased to 224,250. This report is the first official report on national unemployment claims released after a 43-day pause in data reporting by the U.S. federal government due to a shutdown. Chidu Narayanan, chief strategist for the Asia-Pacific region at the Singapore bank, said, "This report, while somewhat dated, is the only important data before the Fed meeting." He expects the U.S. dollar to strengthen in the short term amid high interest rates, robust economic growth in the U.S., and favorable factors from fiscal policy. Institutional analysts state that the non-farm payroll data overall brought surprises, and the data from the previous two months was downwardly revised, but only reduced by a total of 33,000 jobs, so this did not have a significant impact on the September data. The unemployment rate unexpectedly rose to 4.4%, but it is important to note that the labor force participation rate also increased, so this may not necessarily be bad news. Recruitment activity was driven by the healthcare, food services, drinking establishments, and social assistance industries. Although these employment data are lagging indicators, they are still sufficient to garner market attention.