US economy added 1.4m jobs in August as recovery slowed – as it happened
Rolling live coverage of business, economics and financial markets ahead of crucial US non-farm payrolls data
- BoE's Michael Saunders: need for looser monetary policy is quite likely'
- UK housebuilders hit by crackdown on leasehold misselling'
- European shares bounce back from early fall after US tech selloff
- US jobs: 1.4m new jobs added in penultimate pre-election report
3.12pm BST
Some investors and economists were taken aback on Thursday evening after tech stocks sold off heavily following a deep selloff that did not seem to have any particular trigger.
Those jitters appeared to have returned in early trading on Friday, despite relatively positive US jobs figures that showed that the recovery from the pandemic was continuing, albeit slower.
$AAPL 116.16 -3.95%$AMZN 3263.92 -3.09%$BABA 277.62 -1.77%$BIDU 121 -0.41%$FB 282.19 -3.07%$GOOG 1604.62 -2.3%$NFLX 509.05 -3.22%$NVDA 494.52 -5.01%$TSLA 388.15 -4.67%$TWTR 40.45 -2.86%https://t.co/5SJEpxjzjH
The employment numbers coming from the US may paint a picture of an economy in recovery but dig down and you see the fundamental situation remains an unhealthy one. The government was the major contributor to the addition of jobs, so this is something to watch out for going forward as it simply isn't sustainable for the economy if private businesses are not hiring.
What the numbers do highlight, however, is that the easy gains have now been had and the hard work starts now. Participation rates and temporary leavers are down to a level where we can infer that the bulk of re-hiring has been done.
Related: Trump reportedly disparaged captured or killed military officers many times - live
2.58pm BST
There is some volatility on global stock markets as Wall Street opens: the Nasdaq is now down by another 2%, having previously swung between positive and negative territory.
The S&P 500 is down by 0.6%.
2.38pm BST
And just after posting that, the Nasdaq has turned positive for the day: it's now up 0.5%.
The tech rout appears to be well and truly over.
2.35pm BST
It is, as predicted, a mixed bag on Wall Street to end the week, the day after a rout punctured the US tech bubble.
Here are the snaps from the opening trades:
2.27pm BST
After an initial bout of volatility, it looks like markets have welcomed the US jobs figures: the FTSE 100 is now up 0.8% for today at 5,898 points.
The S&P 500 is set for a 0.2% gain when Wall Street opens in a few minutes, although the tech-focused Nasdaq is expected to continue yesterday's selloff, with futures pointing to a 1% fall.
2.12pm BST
And we have reaction, as expected, from someone who is decidedly not an economist: the US president is claiming the improvement in the economy as a victory.
Remember, this is an important report for US election watchers, as there is now only September's report before the poll.
Great Jobs Numbers! 1.37 Million Jobs Added In August. Unemployment Rate Falls To 8.4% (Wow, much better than expected!). Broke the 10% level faster and deeper than thought possible.
2.08pm BST
Robert Alster, chief investment officer at Close Brothers Asset Management, said:
August's figures are not quite reaching the historic highs of May and June, nor the better than expected increase in July. But an improvement is still an improvement. The US economy is demonstrating signs of recovery with a boom in house sales, record highs in the stock market, and industrial production on the up.
But while many businesses have re-opened and consumers are a little more willing to part with their cash, sectors such as travel and hospitality are still struggling to get back on their feet and look likely to struggle for years to come.
2.05pm BST
Some more detailed responses are coming through from economists on the US jobs numbers. One question: does hiring 230,000 workers for the census show there is a strong recovery underway?
Andrew Hunter, senior US economist at Capital Economics, said:
The 1,371,000 gain in non-farm payrolls in August was flattered by the hiring of 238,000 temporary field workers for the 2020 census . [...] Census hiring could rise further in September but, as in previous census years, those workers will be let go again over the following months.
The bigger story was the sharp drop in the unemployment rate to 8.4%, from 10.2%, which now appears to be falling more quickly than we had previously assumed.
Employment growth is still set to lag the recovery in broader economic activity over the coming months given its greater exposure to the services sectors worst affected by the pandemic. Nevertheless, the August data illustrate that, despite the earlier surge in virus cases and more recent fading of fiscal support, the recovery continues to plough on.
1.55pm BST
Canada usually releases its numbers at the same time as the US, just to keep North American economists on their toes. It's a similar story north of the border, with unemployment falling but still at elevated levels.
The rate of unemployment hit 10.2%, down from 10.9% in July and slightly worse than the 10.1% expected by economists.
1.47pm BST
The pace of recovery in the US jobs market slowed again in August as the coronavirus's impact on the economy appeared to be broadening.
Employers added 1.4m new jobs and the unemployment rate dropped to 8.4% last month, dropping below 10% for the first time since the pandemic took hold, the labor department announced on Friday.
Related: US unemployment fell to 8.4% last month as Covid-19 slows recovery
1.43pm BST
The US dollar initially jumped when the jobs numbers came out - perhaps because of that eye-catching unemployment figure - but it has now fallen back.
The trade-weighted dollar basket is down by 0.05% at 92.787.
1.40pm BST
Some mixed reactions to the jobs report - reflecting the fact that it can be seen in different ways: an unemployment beat or a slowing recovery.
Not great news despite the fall in unemployment rate. Shows that making up the job losses that occurred earlier in the year will be a long haul, a painfully slow US jobs recovery. https://t.co/qEhjGulrkf
Kneejerk $USD strength mostly unwound now but, on balance, a strong US report there
Very slight miss on headline, but unemployment rate well down despite rise in participation rate. U6 underemployment rate also down. pic.twitter.com/Pzi0fD0t7j
The slowdown in payroll gains is very clear for leisure and hospitality.
+174k in August, from +621 in July, and just under 2 million in June.
1.35pm BST
While the new jobs figure was in line with expectations, the rate of unemployment hsa come up with a surprise: the rate fell to 8.4% in August.
Economists had expected unemployment at 9.8%, so that is a big improvement - although it is still very much at crisis level.
1.30pm BST
The US economy added 1.4m jobs in August, as the recovery in the labour market slowed further, according to the US Bureau of Labor Statistics.
The BLS recorded 20.1m layoffs in April as the pandemic hit the US, the biggest number on record, but the economy had recovered somewhat since then, with 2.5m new jobs in May, 4.8m in June and 1.8m in July.
1.19pm BST
Another line I missed in the Virgin Atlantic release (apologies): confirmation that the airline is cutting another 1,150 jobs.
Virgin Atlantic said:
Today it is announcing further downsizing across the business, with a planned reduction of 1,150 jobs across all functions. Working closely with unions Unite and BALPA, a company-wide consultation period of 45 days begins today.
To mitigate as many cabin crew redundancies as possible, additionally, the airline is introducing a voluntary, Company-led and financed furlough scheme for an additional 600 crew when HM Government's Coronavirus Job Retention Scheme ends at the end of October. Should HM Government extend its Scheme, the airline intends to continue to benefit from it.
1.02pm BST
And ouch, the FTSE 100 has dipped back into the red just ahead of the payrolls data.
London's blue-chip stocks have been whipsawed today: they fell sharply on the opening bell, before recovering strongly. Now the index is edging around flat.
1.00pm BST
S&P 500 futures are now looking like a flat opening is coming up on Wall Street, but the prospects for the market are likely to be dominated by the US jobs figures, due out in just under half an hour.
The crucial non-farm payrolls data is expected to show that the US economy added 1.4m jobs in August.
Good morning.
The big event this morning is, of course, the monthly US #jobs report.
Consensus expectations are looking for 1.35 million in job creation (would be notable but lowest addition in 4 months) and a 9.8% unemployment rate (would be the first sub 10% level since March).
12.48pm BST
It looks like Virgin Atlantic is not the only one in the aviation industry calling for testing for travellers: Manchester Airports Group has also urged goevrnment to step up.
Charlie Cornish, the chief executive of Manchester Airports Group which owns Manchester, London Stansted and East Midlands airports, said the UK had stood still" while other countries had introduced a mass testing regime for travellers, writes the Guardian's Josh Halliday.
Related: Manchester Airports Group calls for urgent Covid testing of arrivals
12.40pm BST
Virgin Atlantic has officially completed its 1.2bn recapitalisation after receiving approval from UK and US courts.
Achieving this significant milestone puts Virgin Atlantic in a position to rebuild its balance sheet, restore customer confidence and welcome passengers back to the skies, safely, as soon as they are ready to travel. However, the devastating impact of Covid-19 on global aviation continues unabated and the airline must take further steps to ensure survival.
As the airline increases passenger operations, the opening of US borders and removal of quarantine is imperative to recovery. These travel restrictions impact on Virgin Atlantic disproportionally given its long-haul operations focussed on the transatlantic. The airline is calling for both UK and US governments to introduce robust passenger testing regimes to lift travel restrictions whilst protecting public health.
11.59am BST
It's not just the European markets that have bounced: US stock market futures suggest the selloff may have dissipated by the time Wall Street opens this afternoon.
Futures for the S&P 500 suggest the benchmark index will gain 0.3%, and Dow Jones industrial average futures also point to a 0.5% gain. However, the tech-focused Nasdaq, which was the centre of the selloff yesterday, is pegged at a 0.3% decline.
Based on estimates of these dynamics we believe the technical drivers for the sell-off have exhausted themselves and that the market will stabilise here potentially bouncing back into the weekend. Longer term we still remain positive on equities as the rebound narrative is intact supported yesterday by better than expected initial jobless and continuing claims.
11.37am BST
Here's a sign of what Saunders was talking about: a widespread vaccine for Covid-19 is not expected until at least the middle of 2021.
Until effective vaccines are widely available it is likely that populations will have to endure a hokey-cokey of moves in and out of pandemic lockdown restrictions. That has obvious implications for the spending patterns that move financial markets (notionally, at least).
The World Health Organization does not expect widespread vaccinations against Covid-19 until the middle of next year, a spokeswoman said on Friday, stressing the importance of rigorous checks on their effectiveness and safety.
None of the candidate vaccines in advanced clinical trials so far has demonstrated a clear signal" of efficacy at the level of at least 50% sought by the WHO, spokeswoman Margaret Harris said.
11.22am BST
On Brexit, the Bank's forecasts may be too optimistic, Saunders said.
That would certainly tally with the report today from columnist James Forsyth in the Times that Downing Street internally is saying there is only a 30 to 40 per cent chance that there will be an agreement" between the UK and EU on future trade.
Considerable uncertainties remain about the nature of the UK's future trade relations with the EU, the timing with which they will take effect, and whether the adjustment will be smooth or disruptive. The DMP survey suggests that roughly half of firms expect that the UK will have a no-deal exit from the current trading arrangements at yearend or next year.
Relative to the MPR forecast, risks probably lie on the side of a thinner trade deal, a less-smooth transition, or more persistent Brexit-related uncertainty. More generally, global trade policy uncertainty remains high.
11.18am BST
Brace yourself for a long haul, Saunders warned.
He said:
It is possible that, both in the UK and globally, we will be living with Covid for much if not all of the three year forecast period. [...] It is possible that there will not be effective vaccines in the next year or two, or that vaccines will only provide short-lived immunity.
Households and non-financial businesses are likely to want to hold higher levels of liquidity as a buffer against the very high levels of uncertainty over incomes, profits and the future availability of credit.
11.12am BST
Some more highlights from Saunders' speech, which is being given via an online webinar:
This window may now be closing.
Unless activity and hours worked quickly recover the lost ground, unemployment is likely to rise markedly.
10.45am BST
In another key line from his speech, Saunders said he believes the Bank of England will need more monetary stimulus to boost growth.
He said:
Risk management considerations imply we should lean strongly against downside risks at present. The Committee noted at the August meeting that it would continue to monitor the situation closely and stands ready to adjust monetary policy accordingly to meet its remit. I consider it quite likely that additional monetary easing will be appropriate in order to achieve a sustained return of inflation to the 2% target.
10.38am BST
The Bank of England may have overestimated the strength of the UK's recovery from the depths of the coronavirus pandemic recession, according to one of its rate-setting officials.
Michael Saunders, who sits on the nine-member monetary policy committee (MPC), said there was a risk that growth and inflation were weaker than the central scenario in the committee's report (MPR), published last month.
My hunch is that risks lie on the side of weaker growth and a longer period of excess supply than forecast in the August MPR, and hence of a more persistent inflation undershoot. Moreover, a downside scenario would be very costly. It would imply greater longterm scarring on potential growth through hysteresis effects.
10.29am BST
It's mostly relatively quiet on the busiest currency markets this morning. The pound has gained 0.2% against the US dollar to reach $1.3307, while against the euro it is up by 0.2% to 1.2222.
However, it's worth looking at the Turkish lira, which this morning hit a fresh record low of 7.45 lira to the US dollar amid concerns that teh central bank will be unable to control inflation added to tensions between Turkey and Greece in the eastern Mediterranean.
Greek PM Mitsotakis: From all the many over-the-top statements that Mr. Erdogan has made, there is only one I retain, the one about dialogue, and I respond with these six clear words: stop the provocations, start the talks." https://t.co/xq7ZWEvw2k
9.46am BST
Nottingham city council's failed energy supplier, Robin Hood Energy, has agreed to sell thousands of customer accounts to British Gas, and will make hundreds of employees redundant before closing later this year.
The council-run energy company, one of the first in the UK, informed staff on Thursday that 250 people would lose their jobs following a deal to sell its customer base to the UK's biggest energy supplier.
Related: Robin Hood Energy jobs go as customer base sold to British Gas
9.43am BST
The UK construction industry suffered a setback to recovery" in August after the rapid expansion in July when lockdown eased, according to the latest purchasing managers' index.
The UK construction PMI, a closely followed indicator, fell to 54.6 in August, according to data company IHS Markit and the Chartered Institute of Procurement and Supply.
The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May.
House building remained the best-performing area of construction activity, with strong growth helping to offset some of the weakness seen in commercial work and civil engineering activity. The main reason for the slowdown in total construction output growth was a reduced degree of catch-up on delayed projects and subsequent shortages of new work to replace completed contracts in August.
9.34am BST
There are some notable moves among European bank shares this morning after Bankia and Caixabank last night said they were considering a merger to create Spain's biggest domestic lender.
The new bank would have more than 650bn (580bn) in total assets. They are looking at an all-share merger.
9.11am BST
UK new car sales fell back by 5.8% year-on-year in August, after dealers enjoyed a bounce in July from pent-up demand when car showrooms fully reopened.
The decline is disappointing, following some brief optimism in July. However, given August is typically one the new car market's quietest months, it's important not to draw too many conclusions from these figures alone.
With the all-important plate change month just around the corner, September is likely to provide a better barometer. As the nation takes steps to return to normality, protecting consumer confidence will be critical to driving a recovery.
9.02am BST
The FTSE 100 has now gained 0.6%, or 35 points, to reach 5,885 points - it looks like the steep early fall is firmly in the rearview mirror by now.
This morning's dip below 5,800 points to 5,796 was the lowest level since mid-May, but trough-to-peak the market is now up by nearly 100 points.
8.43am BST
The FTSE 100 has now barrelled into positive territory (up 0.2%), but it is being held back by the housebuilder contingent after the Competition and Markets Authority (CMA) said it was launching enforcement action over possible breaches of consumer protection law in the residential leasehold sector".
Barratt Developments, Persimmon, Taylor Wimpey and Countryside Properties are being targeted, after an investigation uncovered evidence that leasehold homeowners and prospective buyers were being misled and charged excessive fees. Shares in Barratt and Persimmon fell by 1.2% apiece.
It is unacceptable for housing developers to mislead or take advantage of homebuyers. Everyone involved in selling leasehold homes should take note: if our investigation demonstrates that their has been mis-selling or unfair contract terms, these will not be tolerated.
8.23am BST
It's a bumpy start on the FTSE 100 this morning: after an early 0.8% fall it has recovered to 5,846 points - only down 0.04% for the day.
8.20am BST
A notable mover this morning on the Irish stock exchange: Ryanair shares are up by 1.9% after a big fundraising.
As we look beyond the next year, we expect that there will be significant growth opportunities for Ryanair's low-cost model as competitors shrink, fail or are acquired by government bailed out carriers.
The placing will provide Ryanair with greater financial flexibility to capture these opportunities.
8.05am BST
It's a steep fall on the FTSE 100 this morning, following in the steps of Wall Street last night and Asian stock markets earlier: London's blue chips have lost 0.8% at the opening bell.
France's Cac 40 is down by 0.5%, Germany's Dax is down by 1.1%, and Europe's broader Stoxx 600 index has lost 0.3% in the opening trades.
8.02am BST
Pret a Manger is to launch a monthly subscription service offering up to five drinks a day in a bid to get customers back to stores following a sales slump due to the pandemic.
Related: Pret offers monthly subscription to boost post-Covid pandemic sales
7.54am BST
Good morning, and welcome to our live coverage of business, economics and financial markets.
Is the US tech bubble bursting? Was it even a bubble in the first place? That is what appears to be on the minds of investors this morning, after a steep selloff among tech stocks last night on Wall Street triggered losses around the world this morning.
In New York, the Dow Jones Industrial Average fell 808 points, or 2.78%, after passing 29,000 for the first time since February on Wednesday. The S&P 500 was down 3.5% and the tech-heavy Nasdaq fell 4.9%.
Both the S&P 500 and the Nasdaq had set their latest record highs a day earlier, and the latter index is still up nearly 28% for the year.
Related: Stock markets fall as investors sell off tech stock amid US job fears
In the new world, a market correction is expressed in wealth losses: 9bn for @JeffBezos and @elonmusk , only 3 for @BillGates - well drop in FAANG market cap = GDP of Ca fait cher la frite cc @PatrickKrizan
Our US economists here at Deutsche Bank are looking for a +1.2m increase in non-farm payrolls, which should push the unemployment rate down to 9.7% (versus 10.2% at present). If realised, that would bring the total gains in nonfarm payrolls since April to +10.5m, but even then it would still mean that less than half of the -22m jobs lost in March and April had been recovered, so this is likely to be a long journey yet.
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