Economy & Fed
Labor Department's October jobs report keeps a Fed rate hike in play
Steady October hiring and rising pay, the Labor Department said, left traders betting the Fed could raise rates after its December meeting. That shift could affect what savings accounts pay.
Quick Read
- Employers kept hiring in October and the unemployment rate was little changed, the Labor Department said.
- Rising hourly pay kept a December Fed rate increase on the table, the CME Group's FedWatch tool showed.
- The 2-year Treasury yield rose and stocks split, with technology shares gaining and the Dow falling.
- Next comes the October consumer price index on Nov. 10 at 8:30 a.m. ET, the next inflation checkpoint before the Fed's Dec. 9 decision.
What did the October jobs report show?
Employers added 165,000 jobs in October, the Labor Department's Employment Situation Summary showed on Friday. The unemployment rate was little changed.
Why it matters: Pay kept climbing. Average hourly earnings for private-sector workers rose 14 cents, or 0.4%, to $38.00, the report showed. That left hourly pay up 3.1% from a year earlier.
Why does a hiring report move rate-hike odds?
The Federal Reserve raises its benchmark rate when it wants to cool demand and inflation. Steady hiring and rising pay give the central bank less reason to hold off.
After the report, the CME Group's FedWatch tool showed traders pricing in a 69.4% chance that the Fed raises rates after its December meeting. That is a market estimate, not a decision by Fed officials.
Bond traders moved the same way. The 2-year Treasury yield, which tracks expectations for Fed policy, rose 5 basis points to 4.51%. A yield is the yearly interest a bond pays, measured against its price.
Shorter and longer rates moved less. The 3-month Treasury bill yield edged up 2 basis points to 4.19%. The 10-year yield, a reference point for mortgage rates, edged up 2 basis points to 4.86%.
How did stocks react to the jobs data?
Stocks split on Friday. The S&P 500 rose 0.3%, and the Nasdaq-100 rose 1.4% as technology shares recovered some ground. The Dow Jones Industrial Average, an older and narrower gauge of big companies, fell 0.5%.
The gains were concentrated. The technology sector fund rose 1.5%. The consumer staples sector fund slid 1.3%.
Friday did not undo the week. The S&P 500 slid 2.7% over the week, after a sharp selloff in technology and AI-linked stocks on Thursday. Ed Yardeni, president of Yardeni Research, said in a note Thursday that Wall Street's pricing of the worst outcome for the AI buildout was overdone.
What could the Fed do next?
The open question is whether inflation backs the case for a December hike. The October consumer price index is due Tuesday, Nov. 10, at 8:30 a.m. ET. That monthly gauge of what households pay for goods and services may help answer it.
October producer prices follow on Nov. 13. The November jobs report arrives on Dec. 4. The Fed announces its rate decision on Dec. 9 at 2 p.m. ET, followed by the chair's press conference.
Traders' odds can shift with each release. A higher-than-expected inflation reading could firm up hike bets, and a lower one could soften them.
For readers
What it could mean for you: Savers with money in high-yield savings accounts, money market funds or new short-term CDs may feel this report most directly. Those yields tend to follow short-term Treasury bill rates, which move with expectations for the Fed's benchmark rate. Friday's rise in the 2-year yield shows traders leaning toward a December hike. If the Fed raises rates, new CD offers and savings yields could drift higher. If the Nov. 10 inflation report cools those bets, short-term yields could ease back instead.
Questions and answers
What did the October jobs report show?
Employers added jobs at a steady pace, the unemployment rate was little changed and average hourly pay rose, according to the Labor Department's Employment Situation Summary released on Friday.
Will the Fed raise rates in December?
No decision has been made. After the jobs report, the CME Group's FedWatch tool showed traders leaning toward a hike after the December meeting. The Fed announces its decision on Dec. 9 at 2 p.m. ET.
How could a Fed rate hike affect savings account yields?
Yields on high-yield savings accounts, money market funds and new short-term CDs tend to follow short-term Treasury bill rates. Those rates move with expectations for the Fed's benchmark rate, so a hike could lift what new savings pay.
When is the next inflation report?
The October consumer price index is due Tuesday, Nov. 10, at 8:30 a.m. ET. The October producer price index follows on Nov. 13.
The numbers
| S&P 500 change | +0.31% |
|---|---|
| 10-year Treasury yield | 4.86% |
Friday’s close
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Not investment advice.
