Investing.com -- US employment growth was far stronger than expected in September, while the jobless rate slowed from the prior month's level, denting bets for another jumbo interest rate reduction by the Federal Reserve at its last two meetings of the year.
The US economy added 254,000 jobs last month, increasing from an upwardly-revised mark of 159,000 in August, according to a closely-watched Labor Department report on Friday. Economists had anticipated a reading of 147,000.
Meanwhile, the unemployment rate decelerated to 4.1%. Forecasts had seen the figure matching August's pace of 4.2%.
Average hourly wages rose by 0.4% on a monthly basis, faster than predictions of 0.3% but slightly slower than an upwardly-adjusted August mark of 0.5%.
Analysts at ING have argued that the jobs market continues to hold "the key to the pace" of upcoming potential rate cuts, particularly as inflation -- once the major focus of a series of aggressive Fed borrowing cost hikes -- shows signs of abating.
Fed Chair Jerome Powell signaled earlier this week that the central bank would likely opt for more traditional quarter-point reductions moving forward, but stressed that the future path of rates is not preset.
Powell added that the rate-setting Federal Open Market Committee is not "in a hurry to cut rates quickly" despite announcing an outsized 50-basis point drawdown at its Sept. 17-18 gathering.
He defended the larger cut, saying it reflected the FOMC's "growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in a context of moderate economic growth and inflation moving sustainably down to 2%."
Recent data has indicated ongoing resilience in labor demand.
Private payrolls increased by more than projected last month, buoyed by hiring in the construction, leisure and hospitality industries.
US job openings also unexpectedly rose slightly in August, possibly indicating some strength in cooling labor demand in the third quarter.
The closely-monitored Job Openings and Labor Turnover Survey showed that available positions, a proxy for labor demand, rose to 8.040 million on the final business day of August, climbing from an upwardly-revised tally of 7.711 million in July. Economists had predicted the so-called JOLTS report would dip marginally to 7.640 million.
"Looking at the labor market strength evident in September’s Employment Report, the real debate at the Fed should be about whether to loosen monetary policy at all. Any hopes of a 50 [basis point] cut are long gone," analysts at Capital Economics said in a note to clients.
Bets that the Fed will cut rates by a quarter-point jumped to 89% following the jobs data, up from 67.9% on Thursday, according to the CME Group's (NASDAQ:CME) FedWatch Tool. The chances of a half-point reduction stood at just under 11%, down from about 32% a day ago.
Stocks on Wall Street surged, while the rate-sensitive 2-year US Treasury yield and its benchmark 10-year counterpart climbed. Yields typically move inversely to prices.