US September payroll data disappoints
GLOBAL woes are starting to trip up the US economy. American employers added 142 000 workers to payrolls in September, less than the lowest estimate of 96 economists surveyed, figures from the Labor Department showed on Friday in Washington.
The jobless rate held at a seven-year-low of 5.1 percent as people left the labour force, wages stagnated and revisions cut the job count in prior months.
The turmoil in financial markets triggered by the overseas slowdown centred in China may cause companies to take on less staff, raising concern that consumer spending – which has helped shield the US – will cool.
The weak report vindicates the Federal Reserve’s decision to hold off on raising interest rates last month, and may even delay any increase until 2016.
“It’s a return to risk aversion, companies are retreating back into their shells a bit,” said Nariman Behravesh, the Massachusetts-based chief economist for IHS and the top payroll forecaster over the past two years, according to data.
“It’s starting to concern me a little bit. I’m not throwing in the towel, but it’s something that gives us pause.”
The disappointing jobs report had diminished the odds of a Fed interest rate hike this year, economists said. The data all but ruled out a move this month, and although a December rate hike remained a possibility, it was less likely than before the report, they said.
“We are not likely to fall into recession, but with maybe a third of the nation’s economy contracting, does the Fed really want to raise interest rates and make it worse?” said Mark Vitner, a senior economist at Wells Fargo Securities. He cited mining, manufacturing, agriculture and energy as industries that were in decline.
The employers that best sustained gains in hiring, including retailers and leisure and hospitality companies, indicates those most exposed to US consumer spending are still holding up.
Consumer spending
Gains in automotive and home sales, powered in part by strong hiring, could cool should employment lose momentum.
“Consumer spending growth has been fairly robust until now,” Behravesh said. “With these kinds of numbers, it raises the question of whether that pace can be sustained.”
If September’s hiring slowdown wasn’t disappointing enough, revisions cut a total of 59 000 jobs from payrolls in the previous two months.
The wage picture was also dim. Average hourly earnings for all employees fell by a penny in September from the prior month to $25.09, the report showed. They increased 2.2 percent over the past 12 months, the same year-overyear change as in August. They’ve posted a 2 percent gain on average since the current expansion began in mid-2009.
The unemployment rate, which is derived from a Labor Department survey of households, was the same as in August, which was the lowest since 2008.
The low reading, however, wasn’t without its own blemish. Joblessness remained low as people left the workforce, pushing the participation rate down to 62.4 percent, the lowest since October 1977, from 62.6 percent.
The report “is a little more evidence that things are perhaps stepping down a bit”, said Michael Feroli, the chief US economist at JP Morgan Chase in New York. “A lot of global hopes were pinned on the US outperforming, so this may reverberate around the world as policymakers look to the US.”
The gap between the unemployment rate and the underemployment rate is one reason Fed chairwoman Janet Yellen and other policymakers have said that when the time comes to increase interest rates, they’ll do so only gradually.
In a speech last week Yellen said there were still people seeking full-time work who could be pulled back into the labour force if the jobless level fell further. She noted that “may involve a temporary decline in the unemployment rate somewhat below the level that is estimated to be consistent, in the longer run, with inflation stabilising at 2 percent”. – Bloomberg
The jobless rate held at a 7 year-low of 5.1% as people left the labour force and wages stagnated…