US September jobs rise misses forecasts but jobless rate surprisingly drops to a 50 year low

US September jobs growth missed forecasts on Friday, but the unemployment rate in the world’s biggest economy surprisingly fell, matching a 50 year low, providing mixed messages for policy makers at the Federal Reserve as they assess a recent weak run of data.

US non-farm payrolls increased by 136,000 jobs in September, below forecasts for a 145,000 rise, although job increases in both August and July were revised up by a combined 45,000 – the August increase was originally 130,000 – and below the monthly average of 158,000 this year.

However, the jobless rate dropped to 3.5% in September, down from 3.7% in August, marking the lowest jobless rate since December 1969 when it also logged in at 3.5%. Economists had expected the rate to remain unchanged. Meanwhile, average hourly earnings climbed 2.9% from September 2018, a slowdown from previous months but still higher than inflation.

READ: Volatile US blue-chips end higher, assuage October plunge as dire services data fuels further rate cuts talk

A run of poor data at the start of October caused markets to crash heavily earlier this week before a bounce-back Thursday as investors yesterday chose to focus on expectations that the weak economy will prompt the Fed to be more aggressive on interest rate cuts when it meets at the end of this month, having already delivered two quarter point rate cuts in the past few months – the first monetary easings in over a decade.

The CME’s Fedwatch indicator yesterday put the chance of an interest rate cut by the Fed at its late October meeting at 90.3%, up from 77% on Wednesday and 49% a week ago.

After initially pointing lower first thing this morning, US stock futures turned higher after the jobs data, pointing to a firmer open on Wall Street in fifteen minutes time.

Today’s closely watched Labour Department report comes on the heels of a string of weak US economic reports, including a plunge in manufacturing activity to a more than 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016.

In addition, the private sector ADP National Employment report showed a deceleration in private payrolls growth last month.

All the data provided indications that President Trump’s 15 month long US-China trade war has eroded business confidence, knocking investment and manufacturing.

Adding to the pressure, on Wednesday that the World Trade Organization backed a US request to impose tariffs on US$7.5 billion of European goods due to the EU subsidies which were previously handed to aircraft manufacturer Airbus, sparking yet another escalation in Trump’s trade crusade.

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Story by ProactiveInvestors