NFP pushes stocks higher

The latest US jobs report is one of the key highlights of the month as it has a huge influence on asset prices. This data point helps us gauge the health of the US economy as we can see how many jobs are created, what is the unemployment rate and how quickly wages are going up.

The US nonfarm payrolls report (NFP)  is also used by the Federal Reserve to decide on rate cuts. Recently the US central bank cut interest rates by 0.50 percent in the September meeting. From this data we could gauge what they will do in the final two meetings of this year, as there is another Fed meeting in November as well as in December. Are they going to carry on cutting?

The headline number came in today at 254,000 jobs created in September. Gold came under pressure as the US dollar strengthened on the news, while US equities initially blipped higher. This was the biggest NFP number since March and so the markets reacted positively. The unemployment rate ticked down to 4.1 percent while wages went up faster than expected.

Investors will likely see less chance of a 0.50 percent rate cut in the next Fed meeting because of these strong numbers and will more likely expect a smaller cut of a quarter point. The US economy’s resilience also raises concern whether inflation will go down and this also adds to the unlikelihood of a big rate cut next month.

Over the past three years, the trend in job creation numbers has been falling, however this latest NFP number seems to indicate that this downtrend has bottomed out. Will the Fed even cut rates at all next month?