U.S. employers added 275,000 jobs in October, accelerating from a revised 180,000 in September. The unemployment rate fell to 4.1 percent from 4.3 percent, signaling sustained labor market strength that erases any remaining doubt about a December rate hike.
Fed funds futures immediately repriced to an 88 percent probability of a 25 basis point increase at the December 12-13 FOMC meeting, up from 65 percent before the data release. The two-year Treasury yield, the most sensitive to immediate Fed action, rose 9 basis points to 4.98 percent.
The broader curve shifted higher but compressed at the short end. The ten-year Treasury yield climbed 4 basis points to 4.65 percent, while the thirty-year rose 3 basis points to 4.79 percent—a modest flattening driven by the outsized move in the two-year. Fixed-income managers now face tangible duration risk if the Fed holds rates elevated through 2025.
Strong wage growth accompanying this jobs report threatens to re-anchor services inflation, the last pillar of persistent price pressures. Any near-term pivot to rate cuts in 2025 becomes unlikely, reinforcing the Fed's "higher for longer" stance. The dollar index gained 0.3 percent to 106.2 on expectations of sustained U.S. rate advantage.
The December 12 release of the November Consumer Price Index will be the last major inflation print before the FOMC decision. November Producer Price Index and retail sales data will also inform the final policy call.
