US job numbers, wages push higher, but stocks unmoved
INCREASES SET THE STAGE FOR FED TO STICK WITH NEXT ROUND OF INTEREST RATE HIKES
US job gains rebounded by more than forecast in August and wages unexpectedly registered their biggest advance of the expansion, keeping the Federal Reserve on track to lift interest rates this month and possibly another time this year.
Non-farm payrolls rose 201,000 after a downwardly revised 147,000 advance, a Labour Department report showed. The median estimate of analysts surveyed called for a gain of 190,000 jobs. Average hourly earnings increased 2.9 per cent from a year earlier while the jobless rate was unchanged at 3.9 per cent, still near the lowest since the 1960s.
Robust hiring and lower taxes have boosted consumer spending and kept the job market near full employment, giving the Fed the go-ahead on raising rates this month.
While investors have seen fewer hikes than policymakers are expecting through the end of 2019 — amid an escalating trade war, turmoil in emerging markets and the risk of a yieldcurve inversion — the latest wage figures could narrow the gap in the outlook between the Fed and markets.
Tight market
“The labour market is still super tight,” Jennifer Lee, senior economist at BMO Capital Markets, said before the report.
The jobless rate remains well below Fed estimates of levels sustainable in the long run. The latest figure reflects a decrease of 46,000 unemployed people in August and a 423,000 drop in the number of people with jobs.
That lowered the participation rate, or share of workingage people in the labour force, to 62.7 per cent from 62.9 per cent the prior month. The employment-population ratio, another broad measure of labour market health that central bankers like to watch, fell to 60.3 per cent ■ from 60.5 per cent. Another measure showed diminishing labour market slack.
The U-6, or underemployment rate, fell to 7.4 per cent from 7.5 per cent. That gauge includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking. The S&P 500 and Dow Industrials dropped yesterday after strong August jobs data raised concerns about the possibility of faster interest rate hikes. But a rebound in chip stocks helped the Nasdaq trade higher.
The S&P financial sector was flat, with only two of the 11 major S&P 500 sectors higher.
“Not a great number for equities even though the headline employment number was strong,” said Steven Englander, global head of G10 FX Research at Standard Chartered Bank.
“Any number that suggests that the Fed will have to tighten out of inflation concerns, well, (A) it is not priced into the equity market right now and (B) for the usual sets of reasons you don’t want to think of it as an equity market positive. It brings forward the risk of cycle end.”
Investors also prepared for a fresh salvo of Sino-US tariffs as a public comment period for proposed US tariffs on an additional $200 billion (Dh734.6 billion) worth of Chinese imports passed at midnight. The tariffs could now go into effect at any moment, although there was no clear timetable, and Beijing has said it would retaliate.
Oil prices also fell as a rise in stocks of refined petroleum products offset a sharp decline in US crude inventories to the lowest level since 2015. Brent crude futures were down 34 cents at $76.16 a barrel during afternoon trading. US West Texas Intermediate (WTI) crude futures slipped 64 cents to $67.13 per barrel. Both contracts were set for their first weekly loss in three.