US nonfarm payrolls miss the mark for the second consecutive month

Another weak jobs report shows job growth starting to stale in the world’s largest economy.

Nonfarm payrolls

US economy added 194,000 jobs in September

US jobs growth slowed two months in a row according to today’s nonfarm payrolls report.

Nonfarm payrolls rose by 194,000 in September, falling way below the Dow Jones estimate of 500,000. The latest stats from the US Labour Department create a more pessimistic picture about the US economy than first thought.

A large drop off in government employment may be behind this latest jobs miss. Government payrolls showed a 123,000 drop, although private payrolls increased by 317,000.

Despite the drop, the unemployment rate continues to edge lower. Today’s report puts it at 4.8%. The share of the labour market held by part-time workers working limited hours due to economic reasons fell to 8.5%.

There are a couple of other small positives to take away from this jobs report. For example, the Labour Force Participation Rate fell slightly to 61.6% from 61.7%. Average hourly earnings rose 4.6% on a year-by-year basis, in line with expectations.

Leisure and hospitality was once more the report’s saving grace. 74,000 new roles were created in this sector in September. Professional and business services contributed 60,000 new positions while retail added an additional 56,000.

Markets show mixed reactions to weak nonfarm payrolls print

Dow Jones futures initially stayed fairly flat when the jobs report landed. S&P 500 futures were rose 0.2%. Nasdaq 100 futures rose 0.58%. The 10-year Treasury yield was around 1.57%.

The Dollar Index dropped slightly, losing 0.15%, staying at around the 94.15 level.

Gold futures were up 1.44%, pushing the precious metal to $1,781.

Perhaps the most important reaction to gauge will the Federal Reserve. The Fed always watches jobs data with an eagle eye, but it’s taken on renewed importance with tapering talk fresh in the air.

The US’s Central Bank has indicated it is ready to start scaling back its massive financial stimulus. Markets expected first tapering to be announced in November at the earliest. Inflation has already soared past the Fed’s 2% target, so it makes sense.

But the jobs market is still a hot button topic for Fed council members. Officials have said they still see the labour sector way below full employment levels. As such, no rate hikes are expected to come this year. Market analysts say a hike is most likely to come in November 2022.