• The US gained 261K jobs in October, above early estimates. 
  • Ongoing expansion of the labor market means a lower chance of slower inflation. 
  • The Fed is set to continue raising interest rates toward a higher peak.

Very premature to even think about pausing – this is a short version of the hawkish message by Federal Reserve Chair Jerome Powell's message on Wednesday. The jobs report vindicates his words. It gives the dollar fresh wings and further hits US stocks. The good news for the economy is bad news for equities. 

Nonfarm Payrolls showed an increase of 261,000, on top of 315,000 in September, an upward revision. Another positive is an increase in wages, 0.4% MoM, above 0.3% expected, while yearly wages met estimates with 4.7%.

The only disappointment came from the rise of the unemployment rate to 3.7%. However, in absolute terms, it is still extremely low – reflecting a tight labor market. The jobless rate is calculated using a different survey, adding to a bit of confusion. 

Nevertheless, the Fed wants to see pain, and it is hard to find much hurting in this NFP. While monetary policy works with a lag, America's job gains are still above 200,000 – pre-pandemic levels. That means ongoing inflationary pressures and a higher peak rate, as Powell stressed on Wednesday. 

The market reaction has been mixed due to optimism about China's reopening and some fatigue from the previous trends. Nevertheless, the dollar looks strong and stocks have limited Chinese fuel to run on.

What's next? I am circling Thursday, November 10, as a critical date on the calendar. That is when the US releases the Consumer Price Index (CPI) numbers for October, and the focus on price rises makes this report more significant than the jobs report. The economic calendar is pointing to a high level of 0.5% MoM in Core CPI. Without a drop, the dollar is set to extend its gains.

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