Yields and Dollar spike on hot jobs data

Labor data suggests no need for rate cuts at the moment

By Ahmed Azzam | @3zzamous | 5 April 2024

Market close
  • US March Nonfarm Payrolls Rise 303,000; Est. +214k

  • US March Unemployment Rate 3.8%; Est. 3.8%

  • Fed swaps shift full pricing of rate cut to September From July

The latest employment data underscores a robust economic landscape, with no immediate indicators suggesting a downturn or overly stringent policy measures. The impressive increase in nonfarm payrolls, reaching 303,000 — well above even the most optimistic forecasts surveyed by Bloomberg — along with slight upward revisions, paints a picture of enduring labor market strength. Notably, the labor force participation rate edged up to 62.7%, maintaining the unemployment rate at a steady 3.8%. Additionally, a rise in average hours worked to 34.4 and a significant 498,000 increase in household employment underscore the genuine nature of this job growth.

Despite this vigor, the Federal Reserve might find solace in the uptick in labor participation and the absence of wage growth acceleration, challenging the premise for imminent rate reductions. With the labor market in such a condition and inflation signals hovering above target levels, the logic behind a rate cut appears tenuous. The resultant climb in yields following this report seems justified, though its lack of effect on the stock market is noteworthy, potentially attributed to the market's different focal points yesterday.

Ahead of the Nonfarm Payroll (NFP) report, dollar bulls showed signs of fatigue, hinting that a substantial beat was necessary to catalyze further gains. The data delivered, reaffirming the resilience of the labor market amidst ongoing economic cycles. This persistence casts doubt on the timing and magnitude of Federal Reserve rate cuts, delaying any potential downturn for the dollar.