US employment growth slows for third straight month

A weaker-than-expected September jobs report has appeared to reduce the chance of a US interest rate hike this year.

US employment growth slowed for the third straight month in September to 156,000.

Economists polled by Reuters had forecast 175,000. The unemployment rate ticked up to 5 per cent from 4.9 per cent.

“This is a good number all the way around,” said Michael Jones, chief investment officer at RiverFront Investment Group in Richmond, Virginia. “It’s strong enough that you’re not worried about the US slipping back into the kind of slump that we had in the first quarter, but it’s not so strong that it precipitates immediate action from the Fed.”

The dollar pared gains after the report. Investors will look out for comments from Fed officials including vice-chairman Stanley Fischer, considered an interest-rate hawk, and board governor Lael Brainard, who has been more dove-ish, for their take on the labour market.

Policy meeting

It will be the last employment report before the Fed’s November 1st-2nd policy meeting. Investors see almost no chance of a rate increase at that meeting given how close it is to the November 8th presidential election.

Fed chair Janet Yellen said last month the Fed will likely raise rates once this year but prices on Fed funds futures suggest just above even odds the hike will come at the Fed's last policy meeting for the year in December.

Some Fed policymakers have vocally defended a go-slow approach to rate increases, but three policymakers voted for a hike last month when the Fed kept rates steady.

Republican candidate Donald Trump has accused the Fed of playing politics by holding rates low, a charge Yellen and other Fed policymakers have denied. Trump has also made reversing job losses at US factories a central campaign promise.

In September, manufacturing employment was expected to fall, which would be the fourth straight month it was down or flat. The sector has shed 39,000 jobs this year.

Rising wages

Affirming overall labour market and rising wages, however, could be an asset for Democratic presidential candidate Hillary Clinton, who has argued that president Barack Obama, also a Democrat, has helped the economy.

Economists expect hourly wages for private sector workers to have risen 2.6 per cent in September from the same month in 2015. The annual growth rate has shown signs of accelerating over the last year, although it remains slower than before the 2007-09 recession.

The Fed lifted its benchmark overnight interest rate at the end of last year for the first time in nearly a decade, but has held it steady since amid concerns over persistently low inflation.

The expected pace of job growth in September would come after a slowdown in August that many economists believe reflected challenges in adjusting the data for changes in the weather.

– Reuters