THE US unemployment rate fell dramatically from 8.1 per cent to 7.8 per cent in a jobs report yesterday that may slow the momentum Mitt Romney gained from a strong presidential debate.
Some of the details of the report were contradictory, but overall it pointed to a stronger US labour market that may boost the re-election prospects of incumbent US president Barack Obama and reduce the chances of more monetary easing by the Federal Reserve.
Non-farm payrolls – based on a survey of businesses and normally the most reliable part of the monthly jobs figures – rose by a mediocre 114,000. That was broadly in line with expectations and points to a still sluggish economy.
But the separate survey of households found a surge in total employment of 873,000. The household survey is used to calculate the unemployment rate and caused it to plunge.
The sampling error on the business establishment survey is plus or minus 100,000 jobs. The sampling error on the household survey is plus or minus 280,000 jobs.
US stock market futures were higher following the report, with the SP 500 up 0.4 per cent at 1,462.40 and above its fair value level of 1,455.95. Nasdaq futures were also 0.5 per cent higher at 2,837 while the Dow Jones Industrial Average added 0.4 per cent to 13,549 before the market open.
There were several encouraging details in the report. On the establishment survey, job growth for July and August was revised upwards, by 40,000 to 181,000 for July and by 46,000 to 142,000 for August. This suggests the economy was stronger than previously thought over the summer.
“With a gain of 114,000 jobs in September and an upward revision for August, this economy remains on a slow but not slowing growth path,” said Kathy Bostjancic, director of macro analysis at the Conference Board.
“More demand would help, as would fewer ill winds blowing in from a contracting Europe and slower emerging markets.”
Most of the job growth came in service industries. Healthcare jobs rose by 44,500 and transportation was up by 17,100. The figures were also supported by unexpected growth of 10,000 in government jobs, which have tended to fall in line with spending cuts.
By contrast, manufacturing, which has been one of the bright spots of the recovery, shed another 16,000 jobs in September, suggesting that the emerging market slowdown is continuing to hit US exports.
The surprise drop in the jobless rate from 8.1 per cent will be a boost to Mr Obama’s re-election campaign following a disappointing performance in the first presidential debate this week.
– (Copyright The Financial Times Limited 2012)
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