US job growth slows, clouding case for Fed rate hike

[chahlley]

(Business Today Saturday 8 October 2016)

Non-farm payrolls rise by 156,000, below forecast

US job growth slows, clouding case for Fed rate hike

WASHINGTON — Employers in the United States created fewer jobs than expected last month while the unemployment rate in the world’s largest economy rose, which could make the Federal Reserve more cautious about raising interest rates in the near term.

Non-farm payrolls rose 156,000, down from a revised gain of 167,000 jobs in August, as the jobless rate ticked up a tenth of a percentage point to 5 per cent, the Labor Department said yesterday.

Economists had expected employers to add 175,000 jobs with no change in the unemployment rate.

US shares inched higher, with the Dow Jones Industrial Average up 0.2 per cent at the opening bell. The bourses in Frankfurt and Paris were down about 0.4 per cent while the United Kingdom’s export-heavy FTSE index was up 0.9 per cent on the pound’s weakness. The US dollar was mixed, up 1.8 per cent versus the pound at US$1.2390, down 0.2 per cent at US$1.1175 against the euro and down 0.7 per cent at ¥103.20.

Yesterday’s employment report is the last before the Fed’s Nov 1-2 policy meeting. Even before the latest jobs data, investors saw almost no chance of a rate increase at that meeting, given how close it is to the Nov 8 presidential election.

Fed Chair Janet Yellen said last month that the Fed was likely to raise rates once this year and interest rate futures are pricing in about a 66 per cent chance the Fed will do this by its Dec 13-14 meeting.

Hourly wages for private sector workers rose 2.6 per cent in September from the same month a year earlier, in line with economists’ expectations. The annual growth rate has shown signs of accelerating over the past year, although it remains slower than that before the 2007-2009 recession.

Three Fed policymakers voted for a hike last month when the Fed kept its key rate target steady at 0.25 to 0.5 per cent. However, the September job market slowdown could bolster the case of Fed policymakers who have vocally defended a go-slow approach to rate hikes.

Republican presidential candidate Donald Trump has repeatedly accused the Fed of playing politics by holding rates low, a charge Ms Yellen and other policymakers have denied.
Mr Trump has also made reversing job losses at US factories a central campaign promise. Manufacturing employment fell by 13,000 jobs in September and the sector has shed jobs in three of the past five months.

At the same time, the overall job market continues to firm, even if at a slower pace, which could be an asset for Democratic presidential candidate Hillary Clinton, who has argued that President Barack Obama, also a Democrat, has helped the economy. AGENCIES