So what signals does this send about the US economy? Next, how will the Federal Reserve's policies change? Let's take a look together!

01 US Non-Farm Data for September Exceeds Expectations!

News on October 4th, the release of the US non-farm employment data for September was like a bombshell, causing huge waves in the financial market.

Looking at the specific data, in September, the number of non-farm jobs in the United States increased by 254,000, a figure far exceeding the market's estimate of 150,000 people, as shown in the figure below:

At the same time, the non-farm new employment numbers for July and August in the United States were also revised upwards, totaling 72,000 more than before the revision. The unemployment rate unexpectedly dropped to 4.1%, the lowest since June 2024.

Such strong data indicates that the US labor market is still full of vitality.

From an industry perspective, leisure and hospitality, healthcare, and government sectors have become the main drivers of employment growth. For example, the hotel industry added 69,000 jobs in September, healthcare contributed 45,000 jobs, and the government sector increased by 31,000.These data not only reflect the development trends of specific industries in the United States but also provide important clues for the overall economic situation. In addition, strong non-farm data have had a multifaceted impact on the financial market.

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02 Market Reaction Following the Release of Non-Farm Data

2.1 Financial Market Volatility

Following the release of non-farm data, the financial market can be described as a whirlwind of changes.

Spot gold plummeted in the short term, with spot gold falling by $16 immediately after the release of the non-farm data. The US Dollar Index showed a skyrocketing trend, with the US Dollar Index surging by more than 60 points in the short term after the release of the non-farm data, currently reporting at 102.41.

US stock futures also rose rapidly, with S&P 500 index futures and Dow futures both turning positive; Nasdaq futures narrowed their losses to 0.1%, having previously fallen by more than 1%.

US Treasury yields also showed significant changes, with the 2-year US Treasury yield falling by 11 basis points during the day, reporting at 3.63%; the 10-year US Treasury yield reached its highest level since August following the release of the non-farm employment data, currently reporting at 3.959%; the 2-year US Treasury yield rose to 3.876%.2.2 Traders' Expectation Adjustments

Following the release of the non-farm payrolls data, traders swiftly reduced their bets on a 50 basis point rate cut by the Federal Reserve in November.

Previously, the market was highly anticipating a significant rate cut by the Federal Reserve in November, but with the release of the non-farm payrolls data, this expectation has cooled considerably.

At present, traders' expectations for the cumulative rate cut over the next four Federal Reserve meetings are less than 100 basis points.

The market considers there to be a 94% chance that the Federal Reserve will opt for a smaller rate cut of 25 basis points in November.

This adjustment reflects the significant impact of the non-farm payrolls data on market expectations and also makes the direction of the Federal Reserve's monetary policy more unpredictable.

3.1 Increasing the Possibility of a November Rate Cut

The market now considers there to be a 94% chance that the Federal Reserve will opt for a smaller rate cut of 25 basis points in November. The release of this data has made the direction of the Federal Reserve's monetary policy even more enigmatic.Although the non-farm employment data for September showed strong performance, earlier data this week indicated that the demand for workers remains healthy and the number of layoffs remains low. This situation may alleviate concerns about the job market cooling off too quickly, thereby increasing the possibility of the Federal Reserve lowering interest rates by 25 basis points next month. For instance, Bank of America directly announced that it has adjusted its expectation for the Federal Reserve's interest rate cut in November from 50 basis points to 25 basis points. However, Annex Wealth Management analyst Brian Jacobsen believes that unless the report for October, which will be released on November 1st, shows a significant decline, the Federal Reserve will use this as a reason to only lower interest rates by 25 basis points. This indicates that despite the better-than-expected non-farm data in September, the Federal Reserve will still consider subsequent economic data when contemplating the magnitude of the interest rate cut.

3.2 Sparks Concerns About Inflation

Many institutions believe that the red-hot non-farm data for September will force the Federal Reserve to turn its attention to inflation issues. For example, Principal Asset Management analyst Seema Shah jokingly said, "Was there a need for the Federal Reserve to cut interest rates in September? Let alone by 50 basis points." This astonishing upside surprise suggests that the job market may actually be a picture of strength rather than weakness, completely refuting the notion that the Federal Reserve might consider cutting interest rates by another 50 basis points in November. At the same time, as indicated by the number of initial claims, the "Challenger" survey, and a plethora of strong economic data, the U.S. economy remains robust.As the Federal Reserve is implementing policy easing, the risk of economic recession has dissipated. The market needs to closely monitor U.S. inflation, as there are policy risks on both sides of the economy currently.

3.3 Impact on Future Market Pricing

The robust performance of the U.S. non-farm data may call into question market pricing for a longer period in the future.

In this regard, analyst Cameron stated that while this does not fully ensure a 25 basis point rate cut next month, the likelihood is higher, although pricing should hover around 28 basis points.

The most obvious implication is a flattening yield curve, which coincidentally also goes against the overall direction of market positions.

The rise in stock index futures is somewhat surprising; if the rise in U.S. interest rates continues or extends throughout the day, there may be a negative reaction in the U.S. stock market.

This series of changes indicates that in September, the U.S. non-farm data not only affected the current market but also brought uncertainty to the pricing and trends of future markets.

Overall, the hot and better-than-expected U.S. non-farm data in September has painted a strong picture of the U.S. economy, but it also presents new challenges for the Federal Reserve's decision-making. In the future, the market will closely monitor the trend of the U.S. economy as well as the monetary policy direction of the Federal Reserve.