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US economy adds more jobs than expected in October

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Via Financial Times

The US economy added more jobs than expected in October, defying concerns that a strike at General Motors would weigh on the employment market.

Non-farm payrolls rose by 128,000 last month from 180,000 in September, which was revised upwards from an initial read of 136,000, according to data from the US labour department on Friday. That blew past median forecasts among economists for the addition of 89,000 jobs, according to a Refinitiv poll.

The unemployment rate ticked up as expected to 3.6 per cent from 3.5 per cent, which had been the lowest point since December 1969.

Average hourly earnings growth held steady at 3 per cent, with September’s number revised higher from 2.9 per cent. In another encouraging sign, non-farm payrolls in August were revised higher to 219,000, from 168,000 previously.

Manufacturing employment fell by 36,000 in October, with a decline of 42,000 jobs from the motor vehicles and parts industry alone. That reflected the impact of a strike at General Motors, which saw thousands of workers walk off the job for six weeks amid negotiations over pay and production plans, costing the automaker nearly $3bn.

The employment numbers for October underline the economic growth data released by the US commerce department on Wednesday, and support the Federal Reserve’s guarded optimism at its meeting this week. American manufacturers are wary after some recent weak readings on domestic manufacturing activity — largely an impact of Washington’s trade war with Beijing — which were a key driver behind the central bank’s decision this week to ease monetary policy again.

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But consumer purchases make up more than two-thirds of US economic activity, and American households continue to go out and spend money, the October data showed. Industries that experienced notable job gains last month included food services and drinking places, which added 48,000 jobs, and social assistance and financial activities. Food-service jobs can serve as an indicator of consumer confidence; families forego dining out unless they are confident about the next pay cheque.

US President Donald Trump touted the numbers in a tweet on Friday morning: “This is far greater than expectations. USA ROCKS!”

Neil Birrell, chief investment officer at Premier Asset Management, said the October jobs data were distorted by the GM strike, but the forecast-beating headline number was encouraging.

“This appears to back up the Fed’s comments on Wednesday night about the economy being in decent shape, and its shift in policy stance. This is more good news for equities and the dollar, but we may see bond yields higher,” he said.

Futures for the S&P 500 jumped to an 0.4 per cent gain, having been up about 0.1 per cent before the release of the data. Treasuries sold off, with the yield on the benchmark 10-year Treasury up as much as 2.98 basis points to 1.7208 per cent, having been down 1.9bp at 1.6718 per cent previously.

“The bears are going to have a tough time looking the bulls in the eye after this number,” said Jack Janasiewicz, a portfolio strategist at Natixis Investment Managers. “A lot of the weakness we have been seeing in the survey data are not supported in the jobs data.”

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For this reason, he said the Fed was set to follow through with its plans and pause the rate-cutting cycle at the December meeting, so long as there was not an escalation in the Sino-US trade dispute. “That is the biggest risk over the next two quarters.”

Additional reporting by Colby Smith in New York

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