The U.S. Labor Department reported on Friday that nonfarm payrolls climbed by 201,000 in August while average hourly earnings rose 2.9 percent for the month on an annualized based. For the month, wages jumped 4%. Economists were looking for payrolls to increase by 191,000 and wages to rise by 0.2 percent on a monthly basis
The most positive take from the report was the jump in average hourly earnings. They posted their biggest increase of the post-recession period. It also provided evidence for the Fed that the long-awaited rebound in wages may have finally arrived.
The impact was felt immediately in the U.S. Treasury markets. The yield on the benchmark 10-year Treasury note rose after the job results and was higher at the close, finishing around 2.939. The yield on the 30-year Treasury bond was up at 3.102 percent.
More importantly, the yield on the two-year note was last seen at 2.707 percent, its highest level since July 30, 2008.
More details from the jobs report showed the unemployment rate, holding steady at 3.9%. Although investors were looking for a dip to 3.8%. In dollar terms, average hourly earnings jumped 10 cents during August, the largest increase in the rate since April 2009.
Overall, the data strongly suggests the Fed is likely to raise rates in December and perhaps as many as four times in 2019. However, these hikes are not yet a done deal based on the performance in the financial futures markets. The fresh data does, however, help push the Fed in the direction of raising rates.
Rising interest rates helped push the U.S. Dollar higher against a basket of other currencies on Friday. The divergence between the hawkish U.S. Federal Reserve and the other dovish major central banks is helping to make the dollar a more attractive investment. To put it another way, the interest rate differential between U.S. government bonds and other foreign government bonds is widening and investors like to chase the higher yield.
This article was originally posted on FX Empire
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