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US unemployment rate hit 50-year low in September

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Evidence of stronger hiring over the summer and the lowest unemployment rate in 50 years were offset by signs of a slowdown in wage growth during September, according to the latest update on the health of the US labour market.

Non-farm payrolls rose by a net 136,000 last month from an upwardly revised 168,000 in August, according to data from the Bureau of Labor Statistics on Friday.

That fell short of the median forecast for 145,000, according to a Refinitiv survey of economists, but the BLS also bumped up its employment figures for July by 7,000, to a gain of 166,000, suggesting more buoyant conditions over the summer.

The unemployment rate fell to 3.5 per cent, its lowest since December 1969, and down from 3.7 per cent in August.

Growth in average earnings cooled in September to their slowest rate in more than a year to an annual pace of 2.9 per cent, down from 3.2 per cent in August and undershooting forecasts for it to remain steady.

Futures for the S&P 500 swung 0.1 per cent higher after the report, having been down 0.3 per cent ahead of the data. Government bonds sold off, driving the yield on the benchmark 10-year Treasury note 1 basis point higher to 1.5426 per cent, having been down 1 basis point at 1.5255 per cent earlier.

A string of disappointing manufacturing and services sector data across Asia, Europe and the US triggered a sharp stock market sell-off earlier this week and a rally in government bonds.

Wall Street stabilised on Thursday, though, as investors warmed to the idea the poor data could prompt the Federal Reserve to ease monetary policy again this year, even though its most recent forecasts implied it would not. Markets are pricing in a 82.2 per cent chance of a 25-basis point interest rate cut at the Fed’s October meeting, nearly double the level a week ago.

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The Federal Reserve has described the labour market this year as “high-pressure”, with unemployment consistently below long-term estimates. For the last year, people have returned to the workforce, and businesses have considered a wider field of applicants and paid for training. The labour force participation rate for working-age men and women hit 82.6 per cent in August, a post-recession high.

Over the summer, Fed policymakers including chairman Jay Powell have increasingly mentioned the benefits of a high-pressure labour market, as the Fed’s preferred inflation measure remains consistently below its target of 2 per cent. 

September’s employment data will be closely watched by the Federal Reserve, which at its last meeting lowered short-term interest rates but indicated it had already eased to reflect trade tensions, and was awaiting further data. 

Mr Powell will speak at an event in Washington later on Friday.

US President Donald Trump, who is battling an impeachment inquiry launched by House Democrats, gave himself credit for the low unemployment rate in a tweet on Friday morning after the report. “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!).”

Via Financial Times

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