The US economy added just 194,000 jobs in September, far fewer than expected and the second month of disappointing growth, as the Delta variant and a tight labor market appeared to be holding back hiring.
The S&P 500 and the Nasdaq have risen slightly, while the Dow Jones is flat. Over here, the FTSE 100 is 0.36% ahead and Italy’s stock market is up 0.3%, while Germany’s Dax and France’s CAC have slipped slightly.
European gas prices have risen again today but only partially recouped yesterday’s losses. They are about a third below the record highs hit on Wednesday, but are up about 300% this year.
The Ofgem boss said that the energy price cap would rise sharply in April and said the regulator would review the way it is calculated, in light of soaring wholesale gas prices.
Our economics editor, Larry Elliott, has taken a look at how a resentful UK plc hit back at Boris Johnson’s conference business-bashing this week.
The transport secretary, Grant Shapps, has said he wants to scrap costly PCR tests for international travellers returning to England in time for the October half-term holiday, in a boost to airlines and the broader industry.
The pent-up public demand to seek out entertainment as Covid restrictions lifted has fuelled a boom in leisure pursuits, with cinemas and bowling alleys hitting pre-pandemic highs, while Brighton Pier has recorded the best week in its history.
A struggling household energy supplier switched thousands of unprofitable customers to rival companies without their express consent, in an apparent bid to avoid financial collapse.
Chinese officials have ordered more than 70 mines in Inner Mongolia to increase coal production by almost 100m tonnes, with the country battling its worst power crunch and coal shortages in years.
Thank you for reading. Have a great weekend! We’ll be back next week. Good-bye! – JK
Wall Street opened higher, but has just turned negative after the disappointing US job market data, with the Dow Jones down 0.2%.
Over here, the FTSE 100 index is 25 points, or 0.36%, ahead at 7,103. Germany’s Dax is flat while France’s CAC has slipped 0.16% and Italy’s FTSE MiB has eked out a 0.2% gain.
The US economy added just 194,000 jobs in September, far fewer than expected and the second month of disappointing growth, as the Delta variant and a tight labor market appeared to be holding back hiring, my colleague Dominic Rushe reports from the US.
Economists had expected the job market to rebound in September, adding 500,000 jobs – but the actual figure was lower than the revised figure of 366,000 new jobs added in August, and the smallest gain since December 2020.
The unemployment rate dipped again to 4.8% in September and the number of unemployed people fell by 710,000 to 7.7m. Both measures are down considerably from their highs at the end of the February-April 2020 recession but remain above their levels prior to the pandemic (3.5% and 5.7 million, respectively, in February 2020).
The latest snapshot of the US jobs market was compiled in mid-September, when the Delta variant was near its peak in the US. The Bureau of Labor Statistics said 1.6 million people were prevented from looking for work due to the pandemic, little changed from August.
October’s job report will now be very closely watched to see if the last two months are the start of a serious trend or an anomaly, as the US recovers from the worst of the pandemic.
Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, said:
The rate of US job creation disappointed for a second month in a row, increasing market doubts on whether the Fed could really be in a position to announce the tapering of its asset purchases as soon as next month.
Not all underlying details are so underwhelming, though, as the unemployment rate declined for the third consecutive month, to a level that may begin to approach the threshold below which underlying inflationary pressure could intensify further. What’s more, hourly earnings surprised to the upside and accelerated relative to the previous month.
Even though the latest jobs report may challenge the widely held view in the marketplace that a taper announcement is very likely at the November policy meeting, we suspect that the timing isn’t going to be altered just by one piece of data. Unless additional downside surprises were to materialise, we think a formal tapering signal before year-end is still seen by the Fed committee as the central scenario.
The key question, regardless of the precise QE path, is what happens to the policy rate. Our view is that the timing and pace of the taper aren’t a direct signal about future rate increases. While the Fed projections indicate that a growing number of policymakers believes a rate increase may be warranted at some point in 2022, we think it may be about one year away, if not longer.
US stock market futures have risen after the weak job market data, as it cast some doubt over the Fed’s plans to taper its stimulus programme.
They are suggesting that the S&P 500 will open 0.2% higher, the Nasdaq is set to gain 0.5% and the Dow Jones looks to be unchanged.
Simon Lister of the financial comparison website, InvestingReviews.co.uk, said:
This was a big miss for the world’s biggest economy and will prove a headache for Jerome Powell and the Federal Reserve.
The expected tapering in asset purchases has just gone from probable to possible in one print. The chance of a rate rise in November is now negligible.
The shadow cast over the US jobs market by the pandemic is proving longer than many thought. The not immaterial upward revision for August will take part of the sting out out this weak number but markets will still go into the weekend on a low.
The August and July numbers were revised higher, to 366,000 from 235,000, and to 1.09m from 1.053m.
John Leiper, chief investment officer at Titan Asset Management, said:
Today’s non-farm payroll number came in below expectations at 194k versus the consensus forecast for 500k. That’s potentially weak enough to push back taper although the unemployment rate continued to fall to 4.8% from 5.2% and the average hourly earnings rate picked up slightly from 4.3% to 4.6% year-on-year.
The initial market reaction was relatively muted although the 10-year Treasury yield is off the day’s high at 1.60%. Bottom line, whilst the US economy continues to reopen and recover, data is coming in below expectations. That delta effect is what matters to markets and without further stimulus we see downside risks to asset prices in general, particularly US equities which have recently broken through key areas of technical support.
The big question is whether this could alter the US Federal Reserve’s tapering plans.
Analysts have pointed to a huge decline in US government jobs.
Richard Flynn, managing director at Charles Schwab UK, said:
Investors will be disappointed by today’s data, particularly as there has been much more positive economic data issued recently: from key September manufacturing reports showing stronger-than-expected growth to, personal income and spending rising in August, and September consumer sentiment unexpectedly being revised higher.
However, as the implication of economies reopening are felt across the world, inflation is a key metric that investors are tracking. According to Bloomberg analytics, inflation has been a hot topic in world-wide earnings conference calls over the past year.
In monitoring transcripts of over 1,500 global stocks’ earnings calls, the word “inflation” has popped up more than 3,600 times, the highest level in over 20 years. Jerome Powell did say recently however that the current inflation spike is really a consequence of supply constraints meeting very strong demand, and that is all associated with the reopening of the economy — which is a process that will have a beginning, a middle and an end. Investors can gain some assurance from this.