Increase in non-farm payrolls of 134,000 in September is smaller than expected
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| Donald Trump and Mike Pence visit an air conditioning and heating company in Indianapolis in 2016. |
US figures have shown the lowest jobless rate since the year of the first moon landings, keeping the world’s largest economy on course for further interest rate rises.
Eagerly awaited figures for jobs and wages showed less inflationary pressure in the world’s biggest economy than had been feared, but still pointed to more hikes by the Federal Reserve.
Financial markets had been braced for a sharp sell off had the latest monthly payroll numbers indicated faster employment growth and pay increases in September, which could have paved the way for faster-than-expected monetary tightening by the US central bank. As a result of the figures undershooting the most optimistic expectations, losses were smaller than feared in early trading in New York but all the major US markets ended down with the biggest losses on the tech heavy Nasdaq exchange.
Data from the Bureau for Labour Statistics (BLS) reported an increase in non-farm payrolls of 134,000 in September, well below the 180,000 predicted by Wall Street analysts. A 0.3% in pay left annual earnings 2.8% higher than a year earlier, a slightly weaker rate of increase than the 2.9% posted the previous month.
Most economists said the jobs market remained strong, pointing to the drop in unemployment from 3.9% to 3.7% – its lowest since 1969 – and upward revisions to employment in July and August. Last month, the Fed raised short-term interest rates for the eighth time since 2015, to a range of 2%-2.25%, and indicated that there would be further increases “consistent with sustained expansion of economic activity”.
The BLS said jobs growth was held back by temporary lay-offs caused by Hurricane Florence and the sense that the report was stronger than it looked meant shares and bonds were slightly lower in early New York trading. The Dow was down almost 150 points, while the yield on US treasuries – which move in the opposite direction to price – rose by two basis points to 3.22%.
James Knightley, the chief international economist at ING bank, said: “The economy is on course for 3% growth, the jobs market is red hot and inflation pressures are on the rise. So while the Federal Reserve no longer describes monetary policy as being ‘accommodative’, it is certainly some way off from being ‘restrictive’. As such, we look for a quarter-point interest rate rise in December with three more hikes likely next year.”
The effective interest rate – or yield – on US benchmark Treasury bonds had been going up ahead of the BLS release amid concerns that stronger inflationary pressure would trigger tougher action from America’s central bank, the Federal Reserve.
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