The Reaction of Interest Rates to the Employment Report: The Role of Policy Anticipations

Abstract

Interest rates have reacted strongly to the monthly employment report in recent years. The authors document the reaction of rates to the report and provide evidence that it has been stronger since the mid-1980s than in earlier years. Evidently the report now has greater impact than formerly on expectations of where the Fed is going to move the federal funds rate. These expectations influence longer-term money market rates.