Solid US jobs report eases recession fears
United States manufacturing is weak, but the labour market continues to hold up with unemployment at a 60-year low.
This week has seen some dismal economic data. Investors, wracked by fears that the United States could be heading towards recession, were anxious to see if a key pillar of the world’s largest economy- the jobs market- is holding up.
Friday delivered positive news on that front.
The US economy added 136,000 jobs in September, figures from the US Department of Labor show. Not exactly a blockbuster headline number, but more than sufficient to absorb the roughly 100,000 new entrants into the US labour force each month.
The nation’s unemployment rate fell even further to 3.5 percent. The last time the rate was that low was 1969. And with data pointing to a reduction in labour-market slack, the unemployment rate seems to have fallen for all the right reasons.
Workers were earning more in September, but the pay boost was modest, with average hourly earnings increasing 2.9 percent from the previous 12 months.
US President Donald Trump seized on the data to take aim at an impeachment inquiry by congressional democrats.
“Breaking News: Unemployment Rate, at 3.5%, drops to a 50 YEAR LOW. Wow America, lets impeach your President (even though he did nothing wrong!).” Trump tweeted.
Figures for job creation in July and August were revised upward by a combined 45,000 more than previously reported.
Taken as a whole, the data from the US labour front points to remarkable resilience in the US jobs market. That bodes well for continued health in consumer spending, which accounts for roughly two-thirds of US economic growth.
Crucially, Friday’s jobs market data will help assuage fears sparked earlier this week that the ongoing US-China trade war – which is pressuring many major global economies – is poised to kick the legs out from under the US economy as well.
A gauge of manufacturing released this week showed activity at US factories plunged to a decade low last month. Another report showed a sharp slowdown in the US services sector.
Most fingers pointed squarely at the US-China trade war, which has disrupted supply chains, raised the cost of materials and hit US exports.
Except for President Trump. He blamed the US central bank, the Federal Reserve, and its chairman Jerome Powell for the struggles of the US manufacturing sector.
“As I predicted, Jay Powell and the Federal Reserve have allowed the dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected,” Trump wrote on Twitter after the manufacturing data was released.
Expectations are running high for the Fed to cut interest rates by another quarter of a percentage point when policymakers meet later this month. CME Group’s FedWatch Tool currently puts the odds at 78.6 percent.