The latest job growth data has smashed past expectations with US employers adding 336,000 new jobs vs 170,000 expected.
The new data comes as figures for August were also revised up by 40,000 bringing the total to 227,000.
Numbers from the Bureau of Labor Statistics led to many currencies falling sharply against the dollar as expectations of further possible rate hikes weigh on the dollar’s continued strength.
With the US showing no signs of a meaningful slowdown, the Fed is now in a position where it will have to consider keeping interest rates higher for longer, and may even need to tighten monetary policy further.
Unemployment was unchanged at 3.8% showing US resilience in the face of a global slowdown. However, with mortgage rates at unsustainable levels for many Americans, and the cost of servicing debt becoming a systemic risk, the possibility of further rate hikes could push corporate America over the edge.
Investors have been anxious about the recent peaks in 10-year Treasury yields as the risk of inflation remains. With the latest figures for job growth, it is more likely that bond holders will face more pain as inflation erodes their returns and this forces the yield for treasuries even higher.
It was just this week that 10-year Treasury yields hit highs not seen since 2007, and could become a major policy issue in the coming weeks ahead as US debt holders look to shore up their currencies vs the dollar by selling their treasuries.
Fed Chair Powell however cautioned that the central bank would be patient in adjusting the interest rate, however with CPI inflation moving back up from the summer, it may need to act more assertively than previously anticipated.
As of 9am EDT, 10-year Treasury yields stood at 4.75%.