US jobs rebound strongly in October, while FTSE 100 reaches new record close - as it happened

Angela Monaghan (until 12pm) and Nick Fletcher

from on 2017-11-03 18:07 (#36WSX)

America's closely watched non-farm payrolls report shows a 261,000 jobs rise in October after hurricanes triggered a sharp fall in September

6.07pm GMT

The FTSE 100 may have hit a closing high after a day of dithering, but it was a more mixed picture elsewhere.

Germany's Dax also hit a new closing peak, while France's Cac also closed higher. But Spain's Ibex fell back, on news that members of the deposed Catalan government were being jailed. US markets moved higher following the widely watched non-farm payroll figures and bumper results from Apple. The closing scores showed:

4.35pm GMT

The UK's leading share index has hit a new closing high - just.

The FTSE 100 finished up 0.07% at 7560.35, beating the previous record of 7556.24 set on 12 October. But it is still well below the intra-day high of 7598.

4.17pm GMT

It may be a quieter week on the corporate and economic front but markets could still press on to yet more record high, reckons Chris Beauchamp, chief market analyst at IG:

Although the [US] jobs report fell short of the lofty forecasts made earlier in the week, the solid rebound from last month's number, plus strong revisions to previous two months, meant that the overall impression of a healthy US economy remains intact, and thus leaves us still expecting the Fed to raise rates once more this year.

After the relentless nature of the newsflow of the past few days, investors seem to have taken the afternoon off, with some judicious profit-taking to round off the week. Sterling valiantly tried to claw its way off the lows hit yesterday, after the swan-dive following the BoE news, but despite Ben Broadbent's best efforts to say 'no, we really do want to keep raising rates', the deputy governor failed to dispel the impression that the MPC will now sit on its hands and await developments.

3.41pm GMT

It was a mixed day for US data, with the dollar finally deciding it was all broadly positive, says Connor Campbell, financial analyst at Spreadex:

While the headline non-farm figure rocketed higher from the hurricane-hit (but upwards revised) 18k in September to 261k in October, that was markedly lower than the blockbuster 312k expected by analysts. The (arguably more important) wage growth reading also came in worse than forecast, plunging from 0.5% to 0.0% month-on-month. Yet any disappointment was tempered by the unemployment rate, which fell to a 17 year low of 4.1%. Elsewhere an underperforming Markit services PMI, which arrived at 55.3 against the initial 55.9 estimate, was countered by a stellar ISM number, at 60.1 against the 59.8 forecast.

After a bit of a wobble post-jobs report that ISM services PMI seemed to swing things in favour of the dollar, which rose 0.4% against the euro and 0.3% against the yen. Only against the pound did the greenback struggle, and even then it held onto almost all of Thursday's hefty gains. As for the Dow Jones, the index was pretty flat after the bell, though is still at a 23500-plus all-time high following Apple's Q4-inspired rise.

3.23pm GMT

There was more US data this afternoon, with better than expected factory goods orders.

They rose by 1.4% in September, up from 1.2% in August and higher than the 1.3% increase forecast by economists.

3.01pm GMT

On the prospect of another Fed rate hike:

Well there's a thought...courtesy @Bloomberg H/T @zerohedge pic.twitter.com/L9RAGSThbe

2.41pm GMT

On the Markit service sector survey, Chris Williamson, chief business economist at IHS Markit said:

The services PMI survey highlights the dilemma facing the Fed as it seeks to determine the right policy course amid signs of solid growth but soft inflation.

Together with the manufacturing PMI, which rose higher in October as hurricane-related supply chain disruptions eased, the latest services survey is consistent with underlying growth in the economy of approximately 3%, as well as buoyant jobs growth.

2.23pm GMT

If the US jobs data presented a rather mixed package, the latest surveys of the service sector are no more clear cut.

The ISM non-manufacturing index for October came in at a better than expected 60.1, up from 59.8 in the previous month and higher than the forecast figure of 58.5. This is the highest level since August 2005 and the 94th consecutive month of growth.

1.35pm GMT

US markets are off to a positive start. Investors took a positive view of the jobs numbers, while Apple also helped after its positive results and upbeat comments on the iPhone X.

The Dow Jones Industrial Average is currently up 23 points or 0.11% at a new record high, while the S&P 500 opened up 0.05% and the Nasdaq Composite added 0.29%.

1.30pm GMT

The pound continues to hold onto its gains after the better than expected service sector data:

The pound is in recovery mode today and is back above 1.31, it;s also the 2nd best performer in the G10 FX space after the Cad,

This comes after better than expected PMI data, suggesting that the BOE may be too pessemistic on the UK growth outlook and pound oversold.

Dollar is in recovery mode after dipping on the NFP release, overall daily range is still quiet tight: 94.40 to 94.80,

This suggests that the market isn't paying too much attention to the NFP figure. USDJPY, the most sensitive to NFP, also back above 114.00.

1.08pm GMT

Here's the view from Danske Bank on the non-farm numbers:

#US #nonfarm: we get the expected rebound in headline print + pos. revisions BUT wage growth disappoints massively at 0.0% m/m. (1/3) pic.twitter.com/WQXs5cvAu1

(2/2) #US #NFP. Actually negative wage growth following surpressed Sept. Unemployment rate lower for "bad reasons" as participation drops pic.twitter.com/keL9oHAv1B

(3/3) In sum, overall weak report but #Fed still set to hike rates in December. Market pricing little changed. #US #EURUSD #FX pic.twitter.com/jTAfH988ID

#US unemployment rate drops due to a big fall in labour force - very volatile survey though! $EURUSD pic.twitter.com/T0mADuSB3y

1.02pm GMT

Here's our report on the jobs figures:

The US economy bounced back in October from a dramatic slump in hiring in the wake of two devastating hurricanes, the labor department announced on Friday.

The US added 261,000 new jobs and the unemployment rate ticked down to 4.1%.

1.00pm GMT

The dollar has recovered from its initial falls in the wake of the jobs data, with traders coming round to the view that a December rate rise is still on the cards. Neil Wilson at ETX Capital:

The dollar fell and Treasuries rose after the monthly US jobs report missed expectations and wages failed to grow by as much as anticipated. The dollar index dropped half a percent before coming back to pare losses. Having sunk below 113.70 on the release from above 114.10, at send time USDJPY was steadying around 113.90. EURUSD's gains have all but been erased and, at just below 1.1670, euro-dollar is almost flat for the day.

Bit of a kneejerk on the misses for jobs and wages but sentiment seems to be recovering pretty swiftly as it won't stop the Fed hiking in December. Markets still see a greater than 90% chance the FOMC will raise rates at the next meeting. With tax reform now on the table we have to also assume that policymakers will start to factor that in to their projections - something they have pointedly refused to do so far - and that could lift expectations for hikes in 2018.

12.58pm GMT

The strong US employment data but modest wage growth backs the idea of gradual Federal Reserve rate hikes, says economist James Knightley at ING Bank:

US employment has rebounded from hurricane related weakness, but wage growth is benign meaning the Fed trajectory on rate hikes remains on track.

The US labour report for October has reversed the hurricane related distortions of the September release. Payrolls rose 261,000 versus the 313,000 consensus, but there were a net 90,000 upward revisions so on balance it is a strong report and backs the case for a December rate hike.

The unemployment rate has surprisingly dropped a tenth of a percentage point and is now 4.1% - the lowest rate since December 2000. Average earnings growth has softened though, coming in flat on the month after a 0.5%MoM gain last month. This leaves pay at 2.4% YoY, which is a little disappointing. However, the fact that underemployment is now just 7.9% (down from 8.3% last month) really underlines how strong the jobs market is, meaning that the balance of risks must lie to the upside on wage growth from here.

With the economy growing strongly and tax reform likely to add further fuel to the fire, the case for higher US interest rates continues to build. Barring an economically damaging government shutdown in early December we expect the Fed to hike rates on December 13 with at least two further rate rises probable under new Fed Chair Jerome Powell next year.

12.51pm GMT

Here's a link to the full jobs report:

Payroll employment rises by 261,000 in October; unemployment rate edges down to 4.1% https://t.co/NsuHovcqn0 #JobsReport #BLSdata

12.50pm GMT

And here's the sector breakdown for the jobs data:

12.46pm GMT

Some of the hurricane related fall in September, notably in the leisure sector, seems to have been reversed in October. The Bureau of Labor Statistics says:

Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that largely reflected the impact of Hurricanes Irma and Harvey. In October, job gains also occurred in professional and business services, manufacturing, and health care.

12.43pm GMT

But Fidelity International's Anna Stupnytska believes the jobs figures are troubling for the Fed:

Weak #US labour market report, especially wage growth... zero wage growth over the past month. Frustrating for #Fed #Yellen! Bad for #USD pic.twitter.com/AXjyU5oySN

12.40pm GMT

The jobs news has sent both sterling and the euro to their highs of the day against the US dollar.

But slightly weaker than expected data is unlikely to deter the US Federal Reserve from raising interest rates in December, analysts believe. Kully Samra, UK managing director at Charles Schwab, said:

A rise in non-farm payroll numbers indicates that the labour market has largely brushed off hurricane-induced issues, paving the way for the Fed to hike rates in December. While some data points missed the mark, the ADP Employment Change Report showed private sector payrolls rose by 235,000 jobs in October, proving that the job market remains in fairly healthy shape with a strong bounce back in hiring from the previous disappointing month.

Alongside robust job growth, third quarter earnings have been solid so far and economic growth has picked up. Along with new records being set by stocks, investor sentiment measures are demonstrating widespread optimism and the US economy has received a boost from expectations that tax reform and earnings will continue to fuel an updraft in the markets.

12.36pm GMT

On the earnings front, average hourly earnings were unchanged after expectations of a 0.2% rise month on month.

The year on year figure fell from 2.8% in September to 2.4%, lower than the forecast 2.7% rise.

12.34pm GMT

The October US jobs number may have disappointed, but figures for the previous two months have been revised upwards.

September saw an 18,000 increase compared to the initial estimate of a fall of 33,000. The August number is up from 169,000 to 208,000.

12.31pm GMT

Breaking News:

The US added 261,000 jobs in October, rebounding strongly from the surprise fall the previous month in the wake of Hurricanes Harvey and Irma.

12.07pm GMT

Meanwhile the pound is picking up after the strong service sector numbers gave more credence to further UK interest rate rises, despite the Bank of England playing this down on Thursday.

Sterling is currently up 0.26% at $1.3091 against the dollar and 0.36% better against the euro at a1.1239.

12.02pm GMT

Connor Campbell, financial analyst at Spreadex, said:

The headline payrolls figure could be huge; analysts have forecast a reading of 312k, a colossal step up from September's hurricane-hit -33k, and potentially the best number since the start of 2015. Elsewhere the jobs report isn't expected to be quite as strong, with an unchanged unemployment rate of 4.2% and a dip in wage growth from 0.5% to 0.2% month-on-month.

Nonfarm payrolls: what the street is expecting >> pic.twitter.com/kthA4WDLA3

11.57am GMT

The non-farm payrolls report is due at 12.30pm and is expected to show a strong rebound in jobs in October after major hurricane disruption triggered a sharp fall in September.

Economists are expecting the report to show an additional 310,000 jobs were created, following a 33,000 drop a month earlier.

11.27am GMT

Fitch has said there will be no major economic impact from Thursday's rate rise, and are not expecting another one in the next 12 months.

Fitch has for some time been expecting the post-referendum interest rate cut to be reversed, although in our most recent global economic outlook (September 2017), we expected this to happen in early 2018. The MPC summary said that all members agreed that future increases "would be expected to be at a gradual pace and to a limited extent," and that monetary policy "continues to provide significant support to jobs and activity."

We think another increase is unlikely in the next 12 months, given the impact of Brexit uncertainty on the outlook for investment. The decision does not alter our UK growth forecasts , which see a net trade boost partially offsetting slower domestic demand this year, enabling real GDP to rise by 1.5%, before slowing to 1.3% next year. But it remains to be seen how firms and households adjust to a shift in the monetary policy stance after such a long period without a rate rise.

UK Rate Rise Has Little Growth Impact, Shows Global Shift #Fitchwire https://t.co/apHls5gRCR pic.twitter.com/D4v46OZbx0

11.07am GMT

Alan Clarke, economist at Scotiabank, says the Bank of England might not wait a year before raising rates again, as many currently expect.

He says the PMIs suggest the economy is on track to grow 0.5% in the fourth quarter, which would be the strongest rate of quarterly growth this year.

I think yesterday taught us that the MPC and particularly the doves want to see concrete signs that wages are picking up before pulling the trigger again.

Nonetheless, if we get the fall in unemployment that I'm expecting, confirmation of 0.5% growth in Q4, and signs of faster wages early in the new year, it's not going to be another year until the next hike.

10.53am GMT

Howard Archer, chief economic advisor to the forecasting group, the EY ITEM Club, says the stronger-than-expected headline services PMI number (55.6) boost prospects for growth in the fourth quarter overall.

The October services purchasing managers' survey showed activity improving significantly to a six-month high, thereby boosting fourth quarter growth hopes. October's rise marked the biggest monthly improvement in the index since August 2016.

Overall, the October PMIs [including manufacturing and construction] suggest that the economy continued to improve gradually at the start of the fourth quarter after GDP growth improved modestly to 0.4% q/q in the third quarter from 0.3% in both the second and first quarters.

10.42am GMT

Behind the headline number, the services PMI is a bit of a mixed bag.

The latest PMI surveys bring mixed news on the economy. While an upturn in business activity growth adds some justification to the Bank of England's decision to hike interest rates for the first time in a decade, a deeper dive into the numbers highlights the fragility of the economy and points to downside risks for the outlook.

A downturn in business optimism about the year ahead, fueled mainly by Brexit-related uncertainty, suggests that risks are tilted to the downside as far as future growth is concerned. Not surprisingly, employment growth slowed for a second successive month as the business mood grew more cautious and risk averse.

9.41am GMT

Britain's services sector growth accelerated unexpectedly last month according to the IHS Markit/CIPS PMI survey.

The headline index combining output, orders and employment rose to a six-month high of 55.6 in October, from 53.6 in September. Any number above 50 signals expansion, and economists had predicted slightly weaker growth at 53.3.

9.25am GMT

The FTSE 100 is up 23 points this morning at 7,578.50, putting it on course for a new closing high. The number to beat is 7,556.24.

The index is benefitting from a weaker pound, because so many of the companies listed have significant earnings abroad.

8.55am GMT

Ben Broadbent's comments that the UK economy could withstand "a couple more rate rises" has done nothing to lift the pound.

Having fallen 1.8 cents - or 1.3% - against the dollar on Thursday, to $1.3067, the pound has dipped further this morning to $1.3053.

8.30am GMT

Ben Broadbent, deputy governor for monetary policy at the Bank of England, has been elaborating this morning on Thursday's decision to raise rates for the first time in a decade.

There will be some [pain] and it's one part of how monetary policy works. Equally one should keep this in context. Around a third of households have owner-occupied mortgages, interest payments on debt - in aggregate - for households, are lower than they've ever been, relative to income, and this is a moderate rise.

One should also bear in mind there are people who derive income from deposits so you're right, but I think one should keep the scale of this in context.

Given our outlook currently, we anticipate we'll need maybe a couple more rate rises to get inflation back on track, while at the same time supporting the economy. That is not a promise, and it never could be a promise.

8.18am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It was momentous day for the UK yesterday, with the first rise in interest rates in a decade. The benchmark cost of borrowing was increased to 0.5% from 0.25%, reversing the cut implemented by the Bank in August last year in response to the Brexit vote.

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/