Cyclical Payrolls Fuel Treasury Yield Reversal

The 10-year Treasury yield rebounded after an initial dip following the September jobs report, a move that Eric Basmajian of EPB Research attributes to strengthening cyclical payrolls.

The September employment data, released on October 2, showed nonfarm payrolls increased by 29,000, while the unemployment rate rose to 4.2%. However, revisions lowered July and August payrolls by a combined 60,000, highlighting the volatility of monthly employment figures.

EPB Research distinguishes between cyclical and non-cyclical payrolls, with construction and manufacturing classified as cyclical due to their sensitivity to interest rates, credit conditions, and capital spending. These sectors provide clearer signals of economic momentum. In September, construction employment grew by 11,000, and manufacturing by 9,000, contributing significantly to the overall payroll increase.

Basmajian noted that the recovery in both cyclical sectors suggests a broader economic upturn rather than a rebound in just one area. This trend, he said, supports low near-term recession risk and a resilient equity market.