The health of the USA economy and reinforced rate rise expectations helped to trigger the sell-off in Treasuries, sending the yield on the 10-year paper to 3.23 per cent this week, its highest level in seven years. This probably won't be the month to learn that lesson, however. As per the data, the unemployment rate fell to 3.7% in September from 3.9% in August.
"No-one at the Fed thinks unemployment near three percent is sustainable", Ian Shepherdson of Pantheon Macroeconomics said in a client note. Labor force participation rate remained at 62.7%. The U-6, or underemployment rate, edged up to 7.5 percent from 7.4 percent.
The unemployment rate has dropped to the lowest rate since December 1969.
The softer than expected gain in establishment payrolls in September reflects several temporary factors.
The bureau said August imports totaled $213.9 billion, also a new record. The economy created 201,000 new jobs even though employment fell by 3,000 in manufacturing (one fears this is the leading edge of the fallout due to tariff increases).
After upward revisions for nonfarm payroll employment in July and August, monthly job gains have averaged 190,000 over the past three months. Over the year, the unemployment rate and the number of unemployed persons declined by 0.5 percentage point and 795,000, respectively. In the past four quarters, average hourly wages have increased by 2.8 percent and accelerated to 3.1 percent in the past two quarters.
Some measures showed the labor market may still have some room for further improvement.
"If the labor market were as tight as implied by the Fed's estimate of full employment, job growth this strong would likely place significant upward pressure on wages", Mickey Levy, chief US and Asia economist at Berenberg Capital Markets in NY, said in a note. The 2018 year-to-date gain is 189,000 compared to 207,000 for 2017. Ambulatory healthcare services added 10,300 jobs in September, while nursing and residential care facilities added 3,400 jobs. While the trade war with China poses a risk, policy makers are likely to keep raising borrowing costs as President Donald Trump's tax cuts are juicing economic growth and supporting demand for labor, though employers are lifting worker pay only gradually.