US economy adds fewer jobs than expected amid global recession fears – as it happened

Jasper Jolly

from on 2019-10-04 14:04 (#4RSSE)

Rolling coverage of business, economics and markets as investors focus on chances of Federal Reserve interest rate cuts

3.04pm BST

After a week of turbulence on global stock markets, a something-for-everyone US jobs report appears to have calmed investor nerves.

Wall Street's main stock indices enjoyed middling increases of about 0.5% in morning trading.

The market took a sigh of relief following the US jobs data published today. The payroll numbers were not the disaster that had been foreshadowed by the Institute of Supply Management surveys, at least not yet.

The overall outlook is still weak - but this seems purely sentiment driven rather than a focus on the fundamentals. For now the hard employment data shows there is resilience in the US economy.

For the moment, we disagree with the ambient pessimism. The lower ISM numbers led markets to fear an upcoming recession, we do not expect it for the next two quarters.

The lower unemployment rate is a tell that the macro situation in the US is closer to what the Fed expects it to be than what markets are thinking.

As for the Fed, this report doesn't really shift the needle too much - not so hot to force a rethink on cuts, but not a disaster that could ramp expectations for more aggressive easing. From this week's data you simply have to come to the conclusion that US growth has markedly slowed but far from slumping into a recession yet.

2.41pm BST

The main US benchmark indices have all risen as expected at Wall Street's opening bell: the Nasdaq led with a 0.4% gain, while the Dow Jones industrial average and the S&P 500 rose by 0.3% apiece.

Apple shares were a big driver of gains thanks to reports in the Nikkei Asian Review that suppliers have been asked to increase production of the iPhone 11 by as much as 10%.

2.21pm BST

US stock market futures are indicating gentle increases are in store at the opening bell on Wall Street.

The S&P 500 and Dow Jones industrial average are both set to gain 0.2%, while the Nasdaq should gain 0.3%.

2.15pm BST

The jobs data have boosted the US dollar against its main trading pairs - it is up by 0.1% for the day.

However, the fact that sterling has fallen against both the euro and the dollar might suggest that Brexit updates may adding to the pressure on the pound.

2.00pm BST

Donald Trump's trade war with China may be making its mark on the global economy (and particularly on manufacturers who pay tariffs), but the jobs report suggests the US economy is not quite in the doldrums.

Non-farm payrolls data for August were also revised up, with 168,000 jobs created rather than the 130,000 previously reported.

The 136,000 increase in non-farm payrolls in September illustrates that while growth in employment (and broader activity) has slowed, it is not collapsing.

Manufacturing employment fell by only 2,000, which is surprisingly resilient given the slump in the ISM manufacturing index. Retail employment fell by 11,400, but that reflects structural change rather than cyclical weakness.

1.51pm BST

There is something for everyone in the jobs numbers.

Donald Trump, the US president, is clearly happy with the unemployment number. Unemployment has fallen to 3.5%, its lowest since December 1969, and below economists' expectations of 3.7%.

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!).

Depending on which numbers you look at, the labor market is either:

Super hot (unemployment rate)

Temperate (payroll job growth)

Cooling down (wage growth)

1.40pm BST

The US unemployment rate fell to 3.5% in September, the lowest since 1969.

1.34pm BST

US stock market futures have risen slightly in the immediate aftermath of the jobs report.

The FTSE 100 has also gained - it's now up by 0.6% for the day.

1.31pm BST

US non-farm payrolls data came in slightly lower than expected, at 136,000 new jobs in September, below the 145,000 average expectation.

1.26pm BST

The market-implied probability of an interest rate cut from the Federal Reserve on 30 October is 85%, according to CME Group's handy Fedwatch tool (which is based on investors' interest rate bets).

That means investors on average do not think that a rate cut is a certainty this month - but it is still thought of as the more likely outcome.

We haven't quite got a full cut priced in but clearly we've seen a big step change in expectations this week given the data, and even an in-line payrolls reading today shouldn't do much to change the narrative.

1.20pm BST

The effect of non-farm payrolls on assets may be tricky to work out at first glance.

John Velis, an FX and macro strategist at US investment bank BNY Mellon, said:

There is a lot riding on Friday's job market report; if it disappoints - while it might increase the odds of policy easing into the end of the year - risky asset markets might finally begin to price in the prospects of more than a mild slowdown in the US economy, and bring asset prices down with them.

The trade war is the story here, with manufacturing already in recession and the services sector now extremely nervous over the impact of tariffs on consumer goods.

So far, the threat to business has not triggered any increase in layoffs, but it's just a matter of time.

1.10pm BST

The US jobs report is one of the most widely anticipated economic data releases every month. The report's significance this month has been heightened by a run of weaker data from the world's largest economy.

Here are some pointers on what to expect:

1.01pm BST

Helena Morrissey, one of the UK's few prominent female investors, has stepped down from her job at Legal & General Investment Management.

12.43pm BST

Documents submitted to the Scottish court in the case to force an extension of the Article 50 Brexit negotiation period promise that the government will send a letter to the EU doing so "no later than 19 October" if there is no withdrawal deal.

The government did not publish its legal arguments in the case, but the barrister for the campaigners bringing the case has read them out in court.

Aidan O'Neill says @UKGOV submission to court promises @BorisJohnson *will* send the #Article50 letter under #BennAct by 19 October. *And* he cannot frustrate the law, @UKGOV claims 1/2

O'Neill says @BorisJohnson has totally contradicted that apparent pledge in Commons yesterday: @10DowningStreet told MPs the UK would leave without a deal on 31 October = PM "inconsistent and contradictory" yet again #BennAct

O'Neill adds that @BorisJohnson repeatedly says UK will leave EU on 31 October - so there must be a legal remedy from the court to force him to obey #BennAct

11.44am BST

Oil prices have risen on Friday, but the outlook continues to be dominated by investor concerns over weakening demand.

Brent crude futures prices gained 0.7% to more than $58 per barrel. However, that remained below the $60 mark at the start of the week, putting the North Sea benchmark on track for its second week of losses.

11.22am BST

The government's road to net zero carbon emissions by 2050 depends on battery electric cars replacing petrol and diesel almost entirely. There's a problem though: fossil fuels will leave big hole in the public finances.

Britain should move to a system of road pricing to combat congestion and compensate for the 28bn loss of revenue from fuel duty as the country makes the transition to electric vehicles, the IFS has said.

The thinktank said the government's pledge that the UK would reach zero net emissions by 2050 meant the tax take from petrol and diesel would shrink to nothing over the coming decades and a new way to raise money from drivers was needed.

11.02am BST

It's all quiet on the sterling front this morning - the pound is just about flat against the euro and the US dollar - as politicians set the groundwork for crunch negotiations on a withdrawal agreement.

Here's a roundup of the Brexit news today.

From our point of view it's a final offer. But we are open and understand the fact that the EU may come back and say 'Look, this deal is fine, but can we just look at this...?' and we'll have to look at that when we get to that point.

But I've got to say, to be frank, as the prime minister said, this is our clear final deal. We think it's a good deal, it's a fair deal, it delivers both legally and security-wise for both our country here in the UK and obviously our friends in Europe.

I am running as an Independent candidate for Mayor of London, and here's why.

Please join me in my campaign: https://t.co/8y3xWpl9hY #Rory4London pic.twitter.com/jnaNy8IF0s

10.42am BST

Easyjet is considering snapping up assets from the collapsed travel operator Thomas Cook.

Of course, like all airlines and tour operators, we will look at what might be of interest to us from the Thomas Cook network. But there is no decision yet.

10.12am BST

Shares on Hong Kong's Hang Seng index fell by 1.1% on Friday amid continued political turmoil.

Lam, speaking at a news conference, said a ban on face masks would take effect on Saturday under the emergency laws that allow authorities to "make any regulations whatsoever" in whatever they deem to be in the public interest.

10.04am BST

A mid-morning update on trading in London: the FTSE 100 has gained 0.4%, in part thanks to higher oil prices helping the weighty drilling contingent.

However, the FTSE is still on track for its worst week in more than a year and a half unless things pick up considerably in the next few hours.

9.55am BST

Some more detail on the car registrations figures. There are a few moving parts, but essentially it is not a very bright outlook for the sector.

Ian Plummer, director at Auto Trader, warned to expect some jiggery-pokery around registrations data as carmakers try to prop up the numbers amid the Brexit-related downturn.

As they focus on hitting their annual targets, both manufacturers and retailers have been using tactics - such as self-registrations - to artificially buoy the numbers and overstate the natural level of demand for new cars, because they just aren't seeing the consumer demand to reach the figures they need to organically.

This push activity will almost certainly continue next month ahead of the Brexit deadline, as the industry prepares for whatever the 31st has in store.

9.37am BST

Some analysis on the SMMT car sales data from Howard Archer, chief economic adviser to the EY Item Club forecasters:

Despite 1.3% year-on-year rise, new #UK #car sales of 343,255 reported by #SMMT was the second weakest performance after 2018) for the key month of September since 2011. Fleet sales saw strongest performance in September (up 8.6% y/y); private sales up just 0.1% y/y https://t.co/RRuUHBZNrS

9.23am BST

It has been fairly quiet on the Brexit front so far this morning - give them time - but here is one of the things that will drive the day in Westminster: one-time Conservative leadership contender Rory Stewart plans to resign.

He announced his resignation in front of an audience of thousands on Thursday night at an event where he read out a letter in which an Eton housemaster described Boris Johnson as being guilty of "a gross failure of responsibility".

It's been a great privilege to serve Penrith and The Border for the last ten years, so it is with sadness that I am announcing that I will be standing down at the next election, and that I have also resigned from the Conservative Party.

9.16am BST

British car sales rose less than hoped in September, with the industry body blaming Brexit uncertainty.

September's modest growth belies the ongoing downward trend we've seen over the past 30 months. We expected to see a more significant increase in September, similar to those seen in France, Germany, Italy and Spain, given the negative effect WLTP [the new testing regime] had on all European markets last year. Instead, consumer confidence is being undermined by political and economic uncertainty.

We need to restore stability to the market which means avoiding a 'no deal' Brexit and, moreover, agreeing a future relationship with the EU that avoids tariffs and barriers that could increase prices and reduce buyer choice.

8.59am BST

Here's some more detail on the Financial Conduct Authority's proposed crackdown on uncompetitive insurance firms. Insurance company shares on the FTSE 100 have edged down following the announcement.

Six million home and motor insurance policy holders are overpaying a combined 1.2bn in premiums a year because insurance firms are not giving good deals to loyal customers, writes the Guardian's Mark Sweney.

The FCA found widespread evidence of a so-called "loyalty penalty" whereby long-standing customers are effectively penalised for sticking with their contracts.

The report identifies a range of tactics being used by insurers including selling policies at a discount to new customers and boosting premiums when they renew, specifically targeting increases at those less likely to switch to a new provider for a better deal.

8.55am BST

Bob Dudley's replacement, Bernard Looney, has run BP's oil exploration operations since April 2016, after a career at BP which started as a drilling engineer in 1991.

8.41am BST

BP shares have gained 0.5% after the news of succession at the top.

8.08am BST

John Lewis is looking for discounts from landlords amid struggles for the department store chain which pushed it to a loss for the first half of the year for the first time, according to the BBC.

The BBC has learned that the retail giant has been telling landlords in some locations that it will withhold 20% of this quarter's service charge.

These are the fees retailers pay on top of rent for services such as heating and security.

Over the last three years we have seen an increase in service charges of 20% and these continued increases are simply not acceptable, particularly in the absence of strenuous efforts by landlords to work collaboratively with us to reduce these costs.

8.06am BST

The FTSE 100 has gained 0.2% at the open - after three days of falling.

There are currently no stocks on London's blue-chip index that have moved by more than 2% in either direction.

7.33am BST

Good morning, and welcome to our rolling coverage of business, economics and markets.

Investors across the world have endured a choppy week, as feeble economic data has taken many off guard. Today we have arguably the biggest of the lot store: the US jobs report.

Insurers often sell policies at a discount to new customers and increase premiums when customers renew, targeting increases at those less likely to switch.

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