A very strong jobs report for September likely suggests that the Federal Reserve may have to raise interest rates when it releases its next policy decision on Nov. 1.
Mohamed A. El-Erian, chief economic adviser at Allianz, tweeted that "the good news for the economy from this jobs report will be seen by many as constituting bad news for markets and monetary policy." He noted that the big upside surprise in job creation "will lead to a selloff in both stocks and bonds."
El-Erian added that this report "will put a hike back on the table for markets on November 1."
Allianz had €520 billion euros ($566.3 billion) in assets under management as of June 30, according to the firm's website.
The U.S. economy created 336,000 jobs in September, well above expectations, and above August's upwardly revised figure of 227,000, the U.S. Bureau of Labor Statistics reported on Oct. 6.
The unemployment rate remained steady at 3.8%.
Economists had expected an increase of 163,000 jobs in September with the jobless rate at 3.7%, according to a survey by FactSet Research Systems, a financial data firm.
The July jobs figure was also upwardly revised to 236,000 — as a result, employment numbers in July and August combined was 119,000 higher than previously reported.
Over the past 12 months, the U.S. economy has added an average of 267,000 jobs per month.
In September, job gains were pronounced in the leisure and hospitality, government, healthcare, professional, scientific, and technical services and social assistance sectors, the Bureau added in the release.
As of the morning of Oct. 6, according to CME Group's FedWatch tool, market participants' pricing of fed fund futures indicated there is an 24% probability that the central bank will hike rates by 25 basis points at the next meeting, and a 76% probability it will keep rates unchanged.
The Fed's key short-term interest rate is now in a range of between 5.25% to 5.5%, after the central bank held rates steady at the Sept. 20 meeting.
Brad Conger, deputy CIO at Hirtle Callaghan & Co., said while the Fed still has the next consumer price index report to examine next week, the jobs report likely augurs "a November increase in the Fed Funds rate."
Hirtle Callaghan has $19 billion in assets under management.
Melissa Brown, head of applied research at Axioma, said that the robust jobs data "may be bad news for equity investors who have been hoping the Fed would pivot to a more accommodative policy." The report "may also signal upcoming earnings declines, as companies struggle to keep up with higher wages and financing costs," she added.
Candice Tse, global head of strategic advisory solutions at Goldman Sachs Asset Management, said the unexpectedly strong payrolls number showed that "while U.S. labor market softening has made incremental progress, the balance between supply and demand of workers will keep the Fed focused on managing inflation."
GSAM has $2.6 trillion in assets under supervision.
