NEW YORK (Reuters – The U.S.’s employment surged more than predicted in October, as the fallout from the spike in COVID-19 infected over the summer subsided. It is more evidence of economic activity regaining its momentum in the early fourth quarter.

According to the Labor Department, nonfarm payrolls grew by 531,000 positions last month. According to the Labor Department, September’s data was updated higher so that 312,000 new jobs were created in September instead of previously reported 194,000. Reuters polled economists and predicted that payrolls would rise by 450,000 jobs. The shortage of workers continued, even though the federal government’s unemployment benefits ended in September and schools were opened again.

MARKET REACTION:

STOCKS: S&P e-mini futures extended slight gains and were up 0.43%, pointing to a firm open on Wall Street

BONDS – The benchmark 10-year bond yield rose to 1.5334%. The yield on the benchmark 10-year Treasury note rose to 1.5334%.

FOREX – The price stayed steady, up 0.23%

COMMENTS

EDWARD MOYA, SENIOR MARKET ANALYST, OANDA, NEW YORK“Today’s number really goes to show that the US economy is accelerating and while the labor market recovery will be long it won’t be lasting. You’ll see this type of report be extremely positive for equities, but it doesn’t really change the Fed’s thinking. Currency markets will be a little more difficult and you’re going to see a lot more interesting divergences as we enter the realm of tapering.”

RICK MECKLER, PARTNER AT CHERRY LANE INVESTMENTS IN NEW VERNON, NEW JERSEY

“The positive aspect of it is that investors have been concerned about a slowdown in the economy. Although there are some signs of slowing in the economy, such as the interruptions to supply chains, (nonfarm payrolls) data shows that things appear to be on track. It will be taken by investors as a sign that it is a good time to keep investing in stocks. It does not reduce inflation potential. Stock market investors who have failed to pay their bond rates will find this a problem.

“It’s hard to understand how we can have a high unemployment rate and still have labor shortages. It suggests a real mismatch.”

DAVID PETROSINELLI, SENIOR TRADER, INSPEREX, NEW YORK

“The last couple of months the headline number was a bit disappointing, so this a catch-up number. The Fed’s 2022 rate hike-off will be a major focus of my thinking. I think this doesn’t make much difference.  But it’s a sigh of relief after the Delta variant dampened employment the past couple of months and now it’s behind us.

“I don’t know that it changes the picture dramatically because we got tapering announced Wednesday. Labor participation is still an issue. People have not necessarily fully reintegrated into the labor force. While participation will rise, it’s one of the biggest problems in the job market. The headwind is that participation is still low.

“This tells me we’re kind of hanging in this range, of 1.5% to 1.7% on the 10-year. Anything that could make us move higher or lower will need to be announced or the series of data or announcements that lead us to that. A bump in hiring was expected by the market. The market is comfortable with where rates are and we’ll have to wait for an inflection point.”

SIMON HARVEY, SENIOR FX MARKET ANALYST, MONEX EUROPE, LONDON

The release saw an upbeat surprise in net employment for October and a positive revision of September’s disappointed reading. This confirms the market’s expectations that a strong payrolls report would be released.

With the Fed’s forward guidance about rates being largely related to the recovery of the labour market, the U.S. 2-year Yield climbed over 2 basis point on the day before moderately moderating. The FX market reaction was influenced by a wider spread of front-end yields, which led to the dollar being bid in the G10 area.

Given the September data slip due to early surveying windows, we had already warned that there was an asymmetrical risk in today’s payrolls release. This was not only because we expected last month’s numbers to be revised upwards, but it also meant that we anticipated October’s net job number to rise due to the positive effects of improving COVID conditions. The dollar will remain elevated until better economic conditions are achieved and central bank communications become more hawkish towards the end.

MICHAEL SHELDON, CHIEF INVESTMENT OFFICER, RDM FINANCIAL GROUP, WESTPORT, CONNECTICUT  “The headline number is certainly quite positive for markets and gives the idea that the economy is in good shape heading into 2022 and also bestows confidence that the consumer is in a strong position to spend and support the economy.”

“An alarming fact is that the participation rate has not increased, which suggests the tightness of the job market may not be as apparent.”

The solid jobs report shows that the Fed took the correct decision with its tapering plan and now it is time for the Fed’s to ease off the gas.

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“It’s hard not to like, this is a really good report overall, particularly when you look from a private sector point of view. It’s 531,000 but 73,000 jobs were lost in government so the private sector is absolutely killing it. Transportation is the one thing that leapt out at me. It is higher than its February 2020 level. That is truly amazing. Transport is all we hear right now. However, we have a great deal more employees here. Transport and ground transport, warehousing, storage, and truck transportation are all up. The only thing that has decreased was couriers and messengers. It is the career opportunities where you can really make a difference. That was far and away the best thing I saw in the report.”

“Yes, there are some supply chain issues but there is so much demand they are still throwing people at that problem and you need to move goods, so at some point that bottleneck will figure itself out.”

ZACHARY GRIFFITHS MACRO STRATEGIST WELLS FARGO CHARLOTTE NORTH CAROLINA

    “I would think that this number would put some upward pressure, particularly on the belly of (the U.S. Treasury) curve as we sort of think the economic numbers are going to have a bigger impact from here now that (U.S. Federal Reserve) Chairman Powell has indicated they’re willing to remain patient and struck a dovish tone earlier this week. The focus now is on employment and they’re pretty much there in the inflation area. A number such as this could bring back the same market pricing that was seen yesterday, when the Bank of England unexpectedly held rates.

PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO

    “It seems to be a very good report. The participation rate was up, which is certainly in line with expectations. This was a revision that had been made for several months. The unemployment rate has fallen again. In the employment report, there isn’t much to complain about.

    The knee-jerk reaction in the markets was not much. The fixed income market is not much better. Spread 2/10 (yield), came in slightly, but not significantly.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“(The employment report) was basically inline and the unemployment rate dropped to 4.6%, but that was probably due to the participation rate ticking lower.

The hourly wage is a bit more but that’s not enough to detract from this positive report. Shouldn’t have an impact on yields.

“Bottom line is it’s a good report, showing an acceleration from the previous month.

“It shows that we’re seeing the jobs market healing to the point where we could expect even larger gains next month as more people return to the labor force.”

“If these numbers continue at this pace, we could probably see full employment at the end of the first quarter.”

TOM PORCELLI, CHIEF US ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

“Everything moved in the direction you would want it to move. This shows that there’s a real underpinning strength. What’s interesting is I don’t think you need this payroll report, though, to know that because there’s been a host of other labor market metrics that have really driven that point home, whether its ADP, or claims, or the measures of confidence that focus on the labor backdrop. I mean over the last couple of months we’ve seen some real strength here, so in some ways I almost view this payroll report as sort of a catch up, because it has been the laggard.”

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

The U.S. dollar has hit new highs thanks to a welcome rebound in hiring. The data shows that the participation rate is still low, so the upside potential for the dollar could be limited. Participation rate sat at 61.6%, which indicates that people are hesitant to return to work due to persistent health issues. “The market is eager to see workers return to work and get off the couch.”

THOMAS HAYES, MANAGING MEMBER, GREAT HILL CAPITAL LLC, NEW YORK

We could not have asked for more positive news. The market was clearly up before the announcement. Pfizer This news is not necessarily the end of the pandemic. “The next stage of labor force improvement will come with the labor force participation rate rising, and Pfizer’s drug is the catalyst.

(Compliled by the global Finance & Markets Breaking News team)