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James Knightley, chief international economist at ING, suggests that the September jobs report of US shows payrolls growth of 136,000, which was a touch weaker than the 145,000 consensus.

Key Quotes

“It reinforces the message that jobs growth is slowing and with wages also undershooting expectations – growth of 2.9% year-on-year versus expectations of 3.2% – the fundamentals underpinning consumer spending may not be as strong as we had believed.”

“Looking at the details we see manufacturing employment fell 2,000, which isn’t quite as bad as the ISM employment component had suggested was possible, but retail fell for the eighth consecutive month and Federal government employment also fell. Business services and health/education remain relatively firm, but there is a general drift lower in job creation in all other sectors.”

“Despite this, unemployment fell to 3.5%, the lowest since 1969, with underemployment also dropping – this uses a different survey. On the face of it, this should be good news for wages as the competition to find workers with the right skill sets heats up, but it hasn’t worked out that way. Wage growth instead slipped to 2.9% from 3.2%, which is a big miss given the strong run of late and the fact there were far fewer working hours in September versus August, which should have helped boost the average hourly earnings figure.”

“Taking this altogether, we have seen payrolls growth slow from an average of 223,000 per month in 2018 to 161,000 for 2019 so far.”

“All in all, it looks as though the Fed will need to step in with more policy easing to support the economy. Currently we are forecasting a December rate cut with a further rate cut in 1Q20.”