Unexpectedly weak job creation in the American economy in September prompted traders to dampen expectations of an imminent Federal Reserve interest rate rise and stoked fears that troubles in the global financial markets are having an impact on the US.
The Department of Labor reported that 142,000 non-farm jobs were created in the month, well down on the 201,000 that analysts had expected and below the average gain this year of 198,000.
The report instantly sent the dollar index down 0.62 per cent and 10-year Treasury bond yields declined 12 basis points to 1.942, as markets discounted the likelihood of a rate hike later this month. US equities also fell, with the Dow Jones opening 1.5 per cent lower.
“Such a woefully weak jobs number is likely to push back any rate hike into 2016, and has unsurprisingly hit a market that expected a pre-Christmas rise like a bucket of cold water,” David Lamb, the head of dealing at the foreign exchange specialist Fexco, said.
“This takes October completely off the table [for a rate rise] and obviously makes December questionable as well,” Michael Feroli of JP Morgan added.
Alex Lydall at the foreign exchange firm Foenix Partners suggested the Federal Reserve’s thinking would be affected by the volatility in emerging markets. “The lingering woes of the Chinese slowdown affecting the US mean the domestic recovery of labour and inflation figures will have to be boosted before [Federal Reserve chair] Janet Yellen takes the plunge into calling a rate hike,” he said.
The jobs report also showed average zero wage growth in September, leaving the annual rate of growth at 2.2 per cent. Overall unemployment was unchanged at 5.1 per cent. The participation rate was 62.4 per cent, down slightly from 62.6 per cent previously – a 38-year low.
However, the under-employment rate – which includes part-time workers who would prefer a full-time position, and people who want to work but have given up looking – fell to 10 per cent, the lowest level in seven years.
