Do Markets Actually Care About US Jobs Data?

Analyst Chat Talking Points:

• US equity markets are starting off October and 4Q’22 on exceptionally strong footing, while the US Dollar has dropped backed meaningfully.
• Following the August US JOLTs report, speculation has gathered pace that the Federal Reserve won’t hike rates as aggressively as feared over the coming months.
• Live coverage of the September US nonfarm payrolls report begins on Friday, October 7 at 08:15 EDT/12:15 GMT.

The first week of October and 4Q’22, and risk appetite is surging. US equity markets are starting off the new month and the new quarter on the verge of posting back-to-back daily rallies of +2.5% or more for the first time since October 2008. Commodity prices are rallying sharply too, with gold prices up over +3.5% and crude oil prices adding over +8.5%. Meanwhile, the US Dollar (via the DXY Index) is down by more than -4% from its high last week.

The rebound in risk appetite comes after a surprising August US JOLTs report on Tuesday morning. Job openings in the US dropped precipitously in August, down to 10.05 million from 11.17 million in July. But these data are exactly what the Federal Reserve wants to see: a labor market losing momentum as an indication that their fight against multi-decade highs in inflation pressures is working. In turn, rates markets are discounting a less hawkish Federal Reserve interest rate path over the coming months.

The JOLTs report serves as a nice appetizer ahead of this week’s main economic course, the September US nonfarm payrolls report on Friday. In recent months, however, US jobs data has taken a backseat to US inflation data as the Fed has more-or-less become a single mandate central bank.

What does the September US nonfarm payrolls report mean for financial markets at the start of October? Senior Strategists James Stanley and Christopher Vecchio, CFA discuss in this Tuesday’s DailyFX Analyst Chat.

— Written by James Stanley and Christopher Vecchio, CFA, Senior Strategists