US Jobs Report Weakens Fed Hike Case but Asia Inflation Concerns Persist

The latest US nonfarm payrolls report has weakened the case for a Federal Reserve interest rate hike in October, though the data still points to a stable labor market rather than a sharp decline. Payrolls increased by 29,000 in September, well below the expected 90,000 and down from the revised 133,000 in August. The unemployment rate rose slightly to 4.2% from 4.1%, as labor force growth outpaced employment gains. Wage growth also slowed, with a monthly increase of just 0.1%, below the 0.3% consensus, and a year-on-year drop to 3.0% from 3.1%. Job gains were concentrated in fewer industries, and previous payroll growth for July and August was revised down by a combined 60,000.

Despite the softer jobs data, Treasury yields rebounded intraday, suggesting limited relief for the US Treasury market. The 10-year yield initially fell to 5.15% before rising to around 5.29%, while the two-year yield recovered from 4.71% to 4.83%. Factors like oil-supply uncertainty, persistent price pressures, and term premia continue to support longer-dated yields.

In Asia, inflation data kept focus on underlying price pressures. Korea’s CPI inflation eased to 2.9% year-on-year in September, matching consensus and down from 3.1%. Japan’s Tokyo CPI accelerated to 2.7% year-on-year, above expectations and up from 1.9% in August. Core Tokyo CPI, excluding fresh food and energy, rose to 3.0% year-on-year, its highest under the Takaichi administration. These readings highlight the need for policy tightening by the Bank of Korea and Bank of Japan.

Vietnam’s economic data showed strong growth but also inflation risks. GDP expanded by 9.95% year-on-year in Q3, surpassing expectations and the revised 8.81% in Q2. Industrial production accelerated to 16.7% year-on-year, while the trade balance turned positive with a $1.27 billion surplus. However, headline CPI rose further to 5.1% year-on-year, up from 4.9%, matching market consensus.