Jobs Report is a Mixed Bag

INTEREST RATE MARKET FUTURES

Futures are higher across the curve following the release of September’s labor report, which painted mixed signals on labor conditions. September’s nonfarm payrolls came in well above expectations at 119,000 new jobs, the biggest gain in five months, while August’s figure was revised from 22,000 to a net loss of 4,000. Jobs gains were seen in Health care, food services and drinking places, and social assistance. Meanwhile, job losses were found in transportation and warehousing, while the Federal Government also continued to see job losses. Establishment survey had higher-than-usual collection rate (80.2%) because businesses self-reported electronically during shutdown. The labor force participation rate remained unchanged at 62.4%, long-term unemployment numbers remain unchanged, while the unemployment rate remained ticked up to 4.4% from 4.3% in August after starting the year at 4.1%. A healthy figure historically, but the rise over the course of the year is likely to be noticed by policymakers at the Fed. The mixed figures are likely to create further uncertainty at the Fed and in the markets as to how the central bank will move in December.

The Fed’s October meeting minutes revealed that there is a growing contingent of policymakers who view it appropriate to keep rates on hold for the remainder of the year, while “most” see further easing as likely. However, “several” of those in that contingent said that a December cut was not necessarily appropriate, while “several” also said a December cut “could well be” appropriate. The minutes reveal that there may not be majority support for a December rate cut, though most are looking towards cutting rates in the future towards a more neutral policy.

President Trump on Tuesday said that his administration has started interviews for the next Fed Chair. An obvious candidate is Fed Governor Waller, who has been in favor of rate cuts over the last several meetings. The administration is likely to put a dove in the place of Powell’s spot, which would naturally tilt the board to a more dovish stance. The five candidates on the shortlist are Fed governors Waller and Bowman, former Fed governor Kevin Warsh, NEC Director Kevin Hassett, and BlackRock head of fixed income Rick Rieder.

The spread between the two- and 10-year yields rose to 55.60 bps up from 54.20 bps on Wednesday and its highest level since mid-October, while the 2-year yield, which reflects interest rate expectations, fell to 3.573%.

STOCK INDEX FUTURES

The indexes are higher following September’s labor report, which markets seemingly took as a signal that the Fed could lower rates next month, while Nvidia’s earnings beat expectations and then some.

Nvidia shares surged in extended trading after the company reported stronger earnings and revenue, alongside a better-than-expected fourth-quarter sales forecast. CEO Jensen Huang said demand for its Blackwell chips is “off the charts.” The results helped lift other chipmakers and AI-linked names as well, bringing the Nasdaq sharply higher after days of taking a bruising. For broader market sentiment, the earnings results show that AI fears may have been overblown. Concerns about circular spending within the sector and debt issuance have recently weighed on markets. Nvidia’s quarterly data-center sales climbed 66% year-over-year, and the company suggested that a $500 billion projection of chip sales over the next two years may prove to be a conservative estimate. If there is an AI bubble, it would certainly be peculiar to see it pop in the next twelve months.

Elsewhere on the corporate front, Walmart raised its full-year forecasts after it beat on profit and sales. However, its shares moved little as investors assessed consumer strength heading into the holiday season. S&P PMIs and the University of Michigan Consumer Sentiment and Inflation Expectations to round out the week on the data front tomorrow.

CURRENCY FUTURES

US DOLLAR: The USD index slipped following the September jobs report, which beat expectations but showed an uptick in the unemployment rate. Payrolls rose by 119,000, beating expectations of a 50,000 rise, while August’s figures were revised lower by 26,000 to show a net loss of 4,000 jobs. However, Fed Funds futures are still pricing under a 50% chance of a rate cut in December. The dollar gained support on Wednesday after the Fed’s meeting minutes revealed strongly differing views about how to proceed on policy in December, underscoring the mixed Fedspeak over the last couple weeks.

EURO: The euro edged higher on a weaker dollar after it fell to a two-week low earlier in the session. September’s labor figures led to a broad dollar weakness, although the figures paint a mixed picture on the labor market. There is little data out of the eurozone this week, and with the European Central Bank expected to hold rates steady for the foreseeable future, monetary policy expectations out of the US are likely to serve as the main catalyst for euro direction. CPI inflation for the eurozone was confirmed at 2.1% in October, next to the ECB’s 2% target. Looking ahead, Flash PMI data for France, Germany, and the Eurozone on Friday will grab attention. Eurozone manufacturing is expected to show a slight expansion, with contractions in Germany and France moving closer to stabilization. Services activity is projected to remain strong.

BRITISH POUND: The sterling is sharply higher against the dollar following the US’s labor report. No new data out of the UK today, which will leave markets time to digest the US labor figures and ready for tomorrow’s PMI data for November. Manufacturing activity is expected to show a further contraction, while growth in the services sector is likely to moderate. A sluggish PMI reading will likely add to bets of a BoE rate cut and see the pound fall further, while any upside reading may have a short-lived effect on the currency. The UK’s annual inflation fell to 3.6% from 3.8%, while services inflation fell to 4.5% from 4.7% in September, likely giving the Bank of England the go-ahead to lower interest rates in December. The central bank expects inflation to have peaked at 3.8%, recorded in August and September, so any upside move in inflation moving forward would certainly surprise markets and strengthen the sterling; however, it is unlikely given the macro disinflationary pressures. Markets also remain attentive to the UK budget scheduled for release on November 26, where Finance Minister Rachel Reeves is expected to adjust tax thresholds.

JAPANESE YEN: The yen dropped to a 10-month low against the dollar, continuing its decline as fiscal spending worries continue to weigh on the currency.  The meeting between Bank of Japan Governor Kazuo Ueda and key government ministers on Wednesday, included Finance Minister Satsuki Katayama, who said there was no specific mention of foreign exchange.  Markets expect that Prime Minister Takaichi’s administration will bring a large spending package, funded by government debt, and is expected to be sized around 17 trillion yen ($110 billion). Bank of Japan Governor Kazuo Ueda has signaled there is a possibility of raising interest rates as soon as next month, although the economy must show signs that wage growth can be sustained.

AUSTRALIAN DOLLAR: The Aussie is higher, gaining support from increased risk sentiment following Nvidia’s earnings beat, which drove the currency higher, and as September’s payroll report led to dollar weakness. Assistant Governor Sarah Hunter said that the central bank is reassessing three key shifts in the economy: how firms are setting prices after the pandemic, how tight the labor market, and changes in policy transmission given the stronger-than-expected housing response. On the data front, Australia’s seasonally adjusted Wage Price Index rose by 3.4% year-on-year in Q3 2025, unchanged from the previous quarter and in line with market expectations. The data relieved some fears that hot wage growth would further pressure inflation, as the Reserve Bank of Australia has likely ended its easing cycle in response to an uptick in inflation, a tight labor market, and solid economic activity.

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