[DiaryPoint Reporter Kim Jeong-hun] The U.S. Bureau of Labor Statistics said in its October jobs report, released Nov. 6, that nonfarm payrolls increased by 165,000 and the unemployment rate was 4.1%. The gain far exceeded the 65,000 increase economists had expected, while unemployment fell from 4.2% in September.
Job growth for the previous two months was also revised higher. The increase in August was revised to 186,000 from 133,000, while September was revised to 60,000 from 29,000. Professional and business services added 70,000 jobs, health care added 42,000 and transportation and warehousing added 25,000.
Average hourly earnings rose 0.4% from the previous month, accelerating from about 0.1% in September. Higher wages support household income, but could make it harder for the Federal Reserve to cut interest rates if inflationary pressures persist.
Strong jobs and wages fuel rate-hike bets
According to market reaction reported by Reuters, the yield on the U.S. two-year Treasury rose 5 basis points to 4.52% after the report, and the dollar index gained 0.7% to 102.18. Bets reflecting the possibility of a Fed rate hike in December rose to 78% after the release, from 70% beforehand.
“If you just look at the October jobs report, it seems the Fed was right to upgrade its assessment of the economy from ‘solid’ to ‘strong,’” said Brian Jacobsen, chief economist at Annex Wealth Management. With hiring stronger than expected and wage growth picking up, markets are once again pricing in rates staying higher for longer—or even another increase—instead of cuts.
Korean stocks face rates, dollar and existing volatility
Rising U.S. interest rates and a stronger dollar can make dollar-denominated assets more attractive, putting pressure on the won and influencing foreign investment flows. Higher U.S. rates can also weigh on valuations of growth and technology stocks in Korea. But the sharp KOSPI drop on Nov. 6 was a separate bout of volatility, coinciding with an earlier sell-off in AI and semiconductor stocks across Asian markets before the U.S. jobs report came out.
Korean investors should look beyond the jobs figures when gauging the next session, tracking the won-dollar exchange rate, the U.S. two-year yield and comments from Fed officials as well. The next U.S. jobs report is scheduled for Dec. 4. Until then, inflation data and the Fed’s December meeting are key events that could shape the rate outlook.