Investing.com - The U.S. economy created more jobs than expected in April while wage growth held steady, bolstering belief that the economy is still on an upward path without creating undue inflationary pressures.
Nonfarm payrolls (NFP) rose by 236,000 in March, smashing consensus expectations for 181,000.
The jobless rate fell unexpectedly to 3.6%. That was its lowest level December 1969 when it was at 3.5%.
Analysts said the numbers vindicated the Federal Reserve's refusal to consider cutting interest rates after signs that the economy cooled in the first quarter.
“Policy implications are that the market got out ahead of itself on pricing in a rate cut,” Joseph Brusuelas, chief economist at consultancy RSM US LLP.
“That is now off the table due to the strong fundamentals underscoring the April jobs estimate. (Fed Chairman Jerome) Powell got it right: no case for rate hike or cut,” he added.
Average hourly earnings grew just 3.2% on an annualized basis, unchanged from March, and short of a consensus forecast of 3.3%. The Fed monitor that component of the data for signs of upward pressure on inflation.
Markets had been expecting a rate cut before the end of the year up until the Fed’s policy decision earlier this week. Powell's resistance, emphasizing that policymakers were comfortable with rates at their current levels, forced markets to reevaluate. They now see the possibility of a December rate cut at less than 50%.
“Solid growth dynamics have been neutralised by subdued inflation,” said Lena Komileva, chief economist with (g+)economics in London. “Although the growth cycle has peaked, there is no sign of (a) deceleration that can lead the economy into a recession.”
Komileva said the report was “a boon for equities”, in so far as it hints a further extension of what is already the longest period of growth in recent history.
U.S. futures extended gains following the release with S&P 500 futures last up 0.5%, having been up 0.4% ahead of the report.
The U.S. dollar index, which measures the greenback against a basket of major currencies, vacillated before paring gains, trading slightly higher at 97.59, compared to 97.73 ahead of the release.
The benchmark 10-year Treasury yield was little changed at 2.56%.