Treasury Yields Shoot Higher After Unemployment Rate Falls to 5.4%

  • U.S. Treasury yields climbed higher Friday morning as the Labor Department's highly anticipated jobs report came out better than expected.
  • The economy added 943,000 nonfarm payrolls in July and the unemployment rate dropped to 5.4%. Average hourly increased 0.4% for the month.

U.S. Treasury yields climbed higher Friday as the Labor Department's highly anticipated jobs report came out better than expected.

The yield on the benchmark 10-year Treasury note added 8 basis points, rising to 1.304% at 4:03 p.m. ET. The yield on the 30-year Treasury bond rose 8 basis points to 1.951%. Yields move inversely to prices.

Despite fears about the spread of the Delta variant of Covid-19, which has rattled bonds and equities in recent weeks, hiring for the month of July increased, the Labor Department reported Friday. The economy added 943,000 nonfarm payrolls and the unemployment rate dropped to 5.4%, according to the department's Bureau of Labor Statistics.

Economists expected the U.S. economy to have added 845,000 jobs last month, according to estimates from Dow Jones, and 5.7% unemployment.

Average hourly earnings also increased more than expected, rising 0.4% for the month.

Combined with previous months' reports, the data paints a picture of a "volatile and grinding recovery," said Jason Pride, Chief Investment Officer of Private Wealth at Glenmede, who warned that the labor market is still a ways from its "full employment" mandate and investors should remember how "volatile, inconsistent, and heavily revised the labor market reports are."

"The nonfarm payroll, unemployment, and hourly earnings numbers remain trapped in the in-between circumstances of a strong recovery, driving increased demand for workers," he said. "The still above-normal unemployment rate and below-normal participation rate point to the lingering mismatch between job openings provided by a recovering economy and the ability and willingness to fill those rolls. Such a gap should close over time but still may take months to find its way to normal levels."

Employment data is key to the Federal Reserve's decision to pare back its bond buying program, beginning the process of tightening its easy monetary policies more broadly and acting as a precursor to the raising of interest rates.

Fed Chairman Jerome Powell has signaled to the markets that the central bank may wait until November to formally announce when tapering will begin.

Cliff Hodge, chief investment officer for Cornerstone Wealth, said "the beat on the employment report and the revisions higher for last month put tapering squarely on the table for 2022."

The 10-year Treasury yield fell to its lowest point since February on Wednesday following disappointing employment data from private payroll firm ADP. It began climbing back above 1.2% following the release of data from the Labor Department Thursday that 385,000 jobless claims had been filed last week, matching economist forecasts.

CNBC's Pippa Stevens and Patti Domm contributed to this market report.

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