NEW YORK- US Treasury yields rose on Friday, reversing earlier declines following a mixed jobs report for August.
The August non-farm payrolls report showed that the world’s largest economy added more jobs than expected last month, but the unemployment rate rose and there was a slight decline in wage inflation. Overall, the data affirmed expectations the Federal Reserve will pause interest rate hikes at its policy meeting later this month, and rate hikes for the rest of the year remained in question.
Thomas Simons, US economist, at Jefferies in New York, said at first glance, the higher payrolls number and the expansion in the labor force were “a little bit more hawkish, perhaps adding to the September hike probability.”
“We get through the details and it’s a little bit more inconclusive and not clear that this certainly increases the odds,” Simons said. “To me, it’s a Friday before the Labor Day weekend and volumes are pretty thin. So moves are being blown out of proportion a little bit because of the thin volume.”
The Labor Department on Friday reported that US nonfarm payrolls increased by 187,000 jobs last month. The number for July was revised lower to show 157,000 jobs added instead of the previously reported 187,000. Economists polled by Reuters had forecast nonfarm payrolls increasing by 170,000 jobs in August.
The unemployment rate increased to 3.8 percent as more people entered the labor force, up from 3.5 percent in July but still below the Fed’s latest median estimate of 4.1 percent by the fourth quarter of this year.
Wage growth eased a bit. Average hourly earnings rose 0.2 percent after increasing 0.4 percent in July. In the 12 months through August, wages advanced 4.3 percent after increasing 4.4 percent through July.
In afternoon trading, US two-year yields, which reflect interest-rate expectations, were flat at 4.866 percent
The benchmark 10-year yield on the other hand, surged 8.6 basis points to 4.176 percent .
Other pieces of US data on Friday showed a mixed picture as well. The US manufacturing index contracted for a 10th straight month in August, although the reading rose from the previous month.
The Institute for Supply Management said its manufacturing index increased to 47.6 last month from 46.4 in July. The index slumped to 46.0 in June, which was the lowest reading since May 2020. A reading below 50 indicates contraction.
US construction spending rose 0.7 percent in July, above the market forecast for a rise of 0.5 percent . The June data was also revised slightly higher to show construction spending expanding 0.6 percent instead of the 0.5 percent previously reported. – Reuters
