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The Non-Farm Payrolls report in the United States, which is released by the Bureau of Labor Statistics periodically on the first Friday of each month, demonstrated a significant jobs growth in September.
As it was argued in our update from earlier this week, September is typically a hectic month for labour and financial markets alike, as the summer period is finalised and subsequently there is a massive flow of returning workers from their holidays.
Consequently, the observed lessening of the unemployment rate by 0.2 points to 3.5 per cent from Augusts’ rate of 3.7 per cent does not come off as much of a surprise.
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The strengthening of the labour market is welcoming news for Jerome Powell and his colleagues at the FED, as the improvement of the employment rate attests to the stability of the US economy as a whole.
Stronger employment signifies the effectiveness of the current monetary policy in the country and negates the need for an immediate intervention by the FOMC.
Arguably, the chances of an additional interest rate cut taking place before the end of 2019 now seem diminished, given that the US labour market is finally reaching levels close to full employment. Additionally, the last time unemployment has been at 3.5 per cent was in December 1969.
In the report it was further revealed that non-farm payrolls employment has risen by 136000 in September, which missed the initial forecasts of 145000. Nevertheless, the employment data for the previous two months has been revised in September, adding 45000 jobs to the employment data.
“The change in total nonfarm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported.”
The robust NFP data has given investors hopes that the evident resilience of the US economy will offset the downside risks from global trade uncertainties, as a contraction in US growth now seems less likely.
Thus, markets received a dose of relief today, and major US indices corrected some of the losses that were incurred during the past several days. The S&P 500 rose by 0.89 per cent today, as the price surpassed the crucial 38.2 per cent Fibonacci retracement level at 2918 once again.
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