US job market weakens in December, fuelling hopes of more stimulus – as it happened

Julia Kollewe

from on 2021-01-08 14:50 (#5CJB3)

2.50pm GMT

Just after Wall Street opened, the main indices hit new all-time highs. The Nasdaq rose more than 100 points to 13,176 while the Dow Jones touched 31,140 and the S&P 500 climbed to 3,824.

Over here, the FTSE 100 index is flat, Germany's Dax is 0.71% higher, France's CAC has gained 0.5% and Italy's FTSE MiB is unchanged.

2.33pm GMT

The S&P 500 and the tech-focused Nasdaq have hit fresh record highs.

2.32pm GMT

Trading has begun on Wall Street, and shares are up !

2.30pm GMT

The global economy has just had its worst year of the modern age and 2021 has not got off to the best of starts either, writes the Guardian's economics editor Larry Elliott. Yet stock markets appear impervious to bad news, with the MSCI world index of developed market shares 10% above its pre-crisis peak. There are a number of reasons why equity markets are so hot.

2.20pm GMT

The US dollar erased gains made before the payrolls figures, and is now down 0.09% against a basket of major currencies.

Ayush Ansal, chief investment officer at the UK hedge fund Crimson Black Capital, says:

The dollar remained fairly resilient in the immediate aftermath of the print as such dire data will reinforce the prospect of the incoming administration reigniting the country with a major fiscal stimulus package.

The fact the Democrats now control the Senate, too, gives policymakers in the new administration carte blanche to supercharge the economy and try and move the country on from the unprecedented events on Capitol Hill.

2.13pm GMT

In financial markets, European bourses are holding on to their gains, while the FTSE 100 index in London is flat at 6,852.

2.09pm GMT

Despite the weakness in the job market, the US economy is unlikely to fall back into recession, as a $900bn stimulus programme has been agreed by Congress and the incoming president Joe Biden is expected to expand spending further to prop up the economy.

Seema Shah, chief strategist at Principal Global Investors, said:

The December jobs report marks the first drop in payrolls since April, and an end to the labour market progress that's been underway since the recovery from the pandemic began back in May. Given the accelerated rise in coronavirus cases recently and the associated drop back in activity, this was not entirely unexpected. Yet it will not go unnoticed by policymakers. With a Blue sweep controlling Congress, further fiscal stimulus is the name of the game and today's data will only assist that agenda.

By contrast, the market reaction to today's weak data is set to be muted. Investors are already looking through this temporary period of economic weakness and instead focusing on the brighter outlook where fiscal spending, monetary stimulus and mass distribution of the COVID-19 vaccines together ensure the US economy quickly returns to its pre-pandemic path.

2.06pm GMT

Here is our full story on the weak US jobs numbers.

The recovery in the US jobs market collapsed in December, the last full month of Donald Trump's presidency, as coronavirus infections soared across the country, writes Dominic Rushe in New York.

1.50pm GMT

In the leisure and hospitality sector, 498,000 jobs were lost in December, taking losses in this sector to 3.9 million since February, the US Labor Department said. Most of the latest loss (372,000) was at establishments serving food and drink.

Other areas fared better: Factory jobs increased by 38,000 after an upwardly revised rise of 35,000 in November. Jobs in construction and retail increased by 51,000 and 120,500 respectively.

1.41pm GMT

It is the first decline in non-farm payrolls in eight months, and suggests the US jobs market recovery stalled in December. The fall was largely due to job losses at restaurants, bars, cafes and hotels.

Adam Button, chief currency analyst at Forex Live, says:

The headline was poor but the positive revisions over the last two months mitigated the damage. The earnings numbers are interesting but I'm inclined to think that's due to lower wage workers losing their jobs.

1.34pm GMT

The US economy shed 140,000 jobs in December, according to the latest US non-farm payrolls data. Economists had expected an increase of 71,000.

However, November's increase was revised higher to 336,000 from 245,000, and October's rise was revised to 654,00 from 610,000. The unemployment rate remained at 6.7%.

U.S. payrolls shrink in December, by 140,000. Another piece of evidence that the #economy was losing momentum as 2020 closed. More stimulus needed. pic.twitter.com/HUumWXc9uZ

1.28pm GMT

The US non-farm payrolls data comes out in a couple of minutes.

The non-farm payroll (NFP) figure is a key economic indicator for the United States economy. It is also referred to as the monthly market mover. Find out why it has been given this nickname here: https://t.co/yOUVEEqhc5 pic.twitter.com/d9ZGWpcPuP

1.15pm GMT

In other good news, the Covid-19 vaccine developed by BioNTech and Pfizer has been shown to work against a key mutation in the more contagious coronavirus variants discovered in the UK and South Africa.

A laboratory study by Pfizer and and the University of Texas, which has not been reviewed by peers yet, found that the vaccine can neutralise the virus with the so-called N501Y mutation of the spike protein. More here.

12.53pm GMT

You can read more about the Moderna vaccine approval on our coronavirus live blog:

We have already vaccinated nearly 1.5 million people across the UK and Moderna's vaccine will allow us to accelerate our vaccination programme even further once doses become available from the spring.

12.40pm GMT

Futures tracking Wall Street's main indices have climbed to new highs ahead of the US jobs data at 1:30pm GMT. The Dow Jones futures are up nearly 0.3%, the S&P 500 is 0.4% higher and the Nasdaq 0.5% ahead.

All three indices hit record highs yesterday and the S&P closed above 3,800 points for the first time amid expectations of a bigger stimulus package and infrastructure spending once Joe Biden takes office, triggering buying of financial, industrial and material stocks.

12.27pm GMT

Oil prices continue to climb and have touched 11-month highs today, boosted by Saudi Arabia's voluntary output cut and rising stock markets. Brent crude has rallied 1.73% to $55.32 a barrel while US crude has gained 1.5% to $51.59.

12.24pm GMT

Bitcoin has scaled new highs, rising to $41,799 today, after breaking through $40,000 for the first time last night. It is still up 5.7% at $41,760. Rival cryptocurrency ethereum rose 3%.

Demand from institutional investors has increased as people are buying bitcoin and other digital currencies as a hedge against inflation. But sceptics say bitcoin has no intrinsic value.

12.20pm GMT

And the European Medicines Agency, the EU regulator, said it may decide on the Oxford University/AstraZeneca coronavirus jab by the end of this month. AstraZeneca is expected to file for approval in the EU next week.

12.18pm GMT

Newsflash on Reuters: The Medicines & Healthcare products Regulatory Agency, the UK regulator, has approved Moderna's Covid-19 vaccine for use, according to the health ministry.

The UK has bought 7m doses of this vaccine - see previous post - but has ordered a further 10m shots, the health ministry said. Almost 1.5 million people have been vaccinated in Britain so far.

11.30am GMT

At the moment, two coronavirus vaccines are available in the UK: the mRNA one developed by German biotech firm BioNTech and US drug giant Pfizer, and a more traditional vaccine from Oxford University and British drugmaker AstraZeneca.

A third Covid vaccine, from the American biotech firm Moderna, could be approved by the UK regulator for emergency use as soon as today, Bloomberg is reporting. It has already been given the green light by regulators in the EU (earlier this week) and the US. The Moderna vaccine is similar to the Pfizer/BioNTech jab and has produced equally strong results in late-stage clinical trials, with efficacy of 94%.

10.49am GMT

Shares in Reach, the publisher of titles including the Daily Mirror, Daily Express and Manchester Evening News, soared by a quarter after the publisher significantly upgraded its profit forecast for 2020.

Reach, which was forced to cut 550 jobs last year to weather the pandemic, said that its forecast of 130m to 135m in underlying profits followed a record digital performance. Analysts had estimated full year profits of about 122m.

Even though the shares have regained all of their Covid price fall, we expect the progress shown today to boost the share price further.

10.47am GMT

In contrast, Marks & Spencer's clothing sales have been hammered by the pandemic. Here is our full story:

10.44am GMT

The FTSE 100 index is back in positive territory, just about, at 6,857.

Pets at Home is the biggest riser on the FTSE 250 index, with the shares up 7.1%, after the retailer lifted its annual profit forecast for the second time in five months following strong Christmas sales.

10.19am GMT

More good news from the eurozone after Germany's strong industrial production data: The unemployment rate across the eurozone dipped to 8.3% in November from 8.4% in October, the second month it has fallen - taking economists by surprise.

The EU's statistics office Eurostat said the number of people out of work fell by 172,000 from October to 13.609 million, although it was up 1.425 million from a year earlier because of the Covid-19 pandemic.

Eurozone November Unemployment Rate - Eurostathttps://t.co/8npi7YrFsI pic.twitter.com/xgTeXkGtKp

10.07am GMT

Sterling is also having a good day. It has extended gains against the euro to 89.94p, up 0.6% on the day.

The dollar has risen slightly ahead of the non-farm payrolls report at lunchtime, the latest data on the US jobs market which should give some indication as to how much more stimulus will be needed to boost the economic recovery.

9.58am GMT

Crude oil has also had a good week, after Saudi Arabia, the world's biggest oil exporter, agreed a voluntary production cut of 1m barrels per day in February and March. Oil prices have reached their highest level in 11 months.

Brent crude touched $54.92 a barrel, the highest since 26 February, and is now up 0.68% at $54.75 while US crude rose to the $51.34 a barrel, the highest since 25 February, and is now 0.59% higher at $51.13 this morning.

9.50am GMT

The FTSE 100 index in London has just dipped into negative territory, down 0.0.4% at 6,854, but a strong rally earlier this week means it's still on track for a weekly gain of about 6%.

Other European markets are still trading higher after strong industrial production data from Germany, and US futures are pointing to a higher open on Wall Street later, a day after the three main US indices hit fresh all-time highs.

This would enable the EU to purchase up to 600m doses of this vaccine, which is already being used across the EU.

Investors are buying the end of an erratic Trump administration and looking forward to something new, which is a Biden presidency and the prospect of a significant spending programme.

People are going for cyclical names and this is driving the market forward but there has to be care taken as this relies on a rebound in the economy in the coming quarters.

9.32am GMT

Germany released strong industrial production data this morning, which fuelled hopes that the economy could avoid a double dip in the quarter. Neither the light lockdown in Germany itself nor the stricter lockdowns in some neighboring countries impacted German industry in November, says Carsten Brzeski, global head of macro at ING.

Factory output climbed 0.9% in November from the month before, following October's upwardly revised 3.4% gain. On the year, production was still down 2.6%. Almost all sectors were up; only the production of consumer goods declined. Brzeski says:

Since the summer, industrial activity has decoupled from the service sector and other lockdown-hit activities. The nature of the smart lockdowns' is clearly one important driver of this divergence. Also, the German manufacturing sector seems to benefit from the strong and continuing recovery of the Chinese economy.

Yesterday's industrial orders data suggests that this divergence could still continue. However, don't forget that the manufacturing sector entered the crisis on a much weaker footing than most other sectors. Despite the recent acceleration, industrial production is still some 4% below its pre-crisis level.

9.02am GMT

The housing market has been surprisingly strong in recent months, despite the Covid-19 pandemic. Mortgage approvals rose in November to 104,9696, the highest level in more than 13 years, according to the latest Bank of England figures.

But many forecasters expect the market to slow this year as the stamp duty holiday expires at the end of March, the help to buy programme for new-build homes becomes more restricted, and crucially, unemployment is expected to rise sharply, once the government's job retention scheme ends in April.

8.54am GMT

Jeremy Leaf, north London estate agent and a former residential chairman at the Royal Institution of Chartered Surveyors, says:

Not surprisingly, the pace of house price rises started to slow in December, which is exactly what we found in our offices, as home movers were deterred by further lockdown restrictions and seasonal distractions.

However, we recorded very few abortive sales, other than when chains had broken down or price renegotiations in response to reduced activity. Therefore, looking forward we expect the pattern to be repeated and the overwhelming majority of transactions to proceed to completion, followed by more balance between supply and demand as rollout of the vaccinations hopefully accelerates.

8.41am GMT

UK house prices rose in December to a fresh record, but at the slowest monthly rate in six months, according to Halifax, one of Britain's biggest mortgage lenders. It said the average price of a home rose 0.2% to 253,374, a new all-time high.

However, the monthly rise was the smallest gain since June when prices were flat, and compares with November's 1% increase. The annual growth rate slowed to 6% in December from 7.6% in November.

2020 was a tale of two distinct halves for the housing market. Following a strong start, the first half was dominated by the restrictions on movement due to COVID-19, and prices were subsequently down 0.5% at mid-year as the market effectively ground to a halt. However, when the market reopened, prices soared as a result of pent-up demand, a desire amongst buyers for greater space and the time-limited incentive of the stamp duty holiday.

All this left average prices sitting some 6.0% higher at the end of 2020 when compared to December 2019, a notably strong performance given the anticipated impact of the pandemic earlier in the year. Whilst the annual rate of inflation did fall compared to November (+7.6%) to stand at its lowest level since August, it should be noted that this also reflects a particularly strong period for house prices towards the end of 2019 as political uncertainty at that time began to ease.

8.12am GMT

Other European stock markets are also pushing higher in early trading.

8.10am GMT

Shares in London have opened higher. The FTSE 100 index has risen 26 points, or 0.42%, to 6,885 after the opening bell. The housebuilders Barratt and Taylor Wimpey are the biggest risers, trading 4.5% and 2.4% higher respectively, after Barratt issued an upbeat trading update.

Barratt, Britain's biggest house builder, sold 9,077 homes in the six months to December, up from 8,314 a year earlier. It said demand was lifted by the introduction of the stamp duty cut and the help to buy programme, ahead of the end of March when the stamp duty holiday is due to end and help to buy becomes more restricted.

8.00am GMT

Marks & Spencer said this morning that its clothing sales dropped by a quarter over the key Christmas trading period as the retailer was hammered by the closure of non-essential shops because of Covid 19, reports our retail correspondent Zoe Wood.

The restrictions on socialising over Christmas - no Christmas parties this time - meant that party dresses didn't sell. But pyjamas and jogging bottoms were big sellers as people snuggled up at home.

7.28am GMT

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

Asian stocks rocketed to record highs at the end of 2021's first trading week, as investors shrugged off rising coronavirus infections globally and political unrest in the US to focus on hopes of economic recovery later this year. On Wall Street, all three leading indices hit record highs during the day, and the S&P 500 closed 1.48% higher, the tech-heavy Nasdaq climbed 2.56% and the Dow Jones ended the day up 0.69%.

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