Strong U.S. Employment Can Be a Problem Too! Payrolls Added 165k—Why Did Markets Get Nervous?

Job seekers may welcome more jobs, but Wall Street may not be happy to hear the news.
The U.S. added 165k nonfarm jobs in October, far exceeding market expectations. The unemployment rate fell to 4.1%, while average hourly earnings rose 0.4% month over month.
Normally, such a strong performance in the job market would be cause for celebration. But financial markets have their own logic: a weak economy is worrying, and an economy that is too strong can also make them nervous.
The reason is the Federal Reserve.
If the job market stays hot and rising wages add to inflationary pressures, the Fed will have little reason to rush to cut rates and may even consider raising them further.
That is why the probability of a rate hike in December rose to 77.7% after the nonfarm payrolls report was released.
For ordinary households, rate hikes could put pressure on mortgage, auto loan, and credit card borrowing costs; for businesses, financing and investment decisions could also become more cautious.
So although the U.S. job market delivered an impressive report this time, it left global markets with another challenge.
You can't judge the economy by employment numbers alone; you also have to consider prices and borrowing costs.
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