The US labour market report disappointed with job growth rising only 148,000 in September versus Consensus of 180,000 and our own estimate of 200,000. The net revision for the previous two months was +9,000.
The three-month moving average for payrolls is 148,000, which is clearly below the Fed’s comfort zone for tapering in the 175,000-200,000 area. Job growth clearly lost momentum over the summer and into the autumn. Private payrolls rose only 126,000 whereas government jobs increased by 22,000.
The nominal wage income proxy rose 3.1% on a three-month annualised basis. This is on the low side and explains why private consumption is still subdued.
The soft job growth underscores that GDP growth has also disappointed by tracking just below 2% in Q3. Q4 is likely to fail to show any increase given the negative effects from the government shutdown and expected sentiment hit from the debt ceiling woes. Hence, job growth is unlikely to pick up in Q4.
This is likely to push Fed tapering further into the future and it seems likely that it will be March before we see a meaningful improvement in growth and employment enough to push the Fed into tapering asset purchases.
Details of the report didn’t change the overall picture of a soft report. On a positive note, the unemployment rate fell to 7.2% from 7.3%, as employment in the household survey increased 133,000. The labour force increased 73,000 but the overall participation rate was unchanged at 63.2%.
In the private service sector only 100,000 jobs were added, dragged down by low numbers for retail, education and leisure. Construction payrolls rose 20,000, which is decent for this sector. Manufacturing was fairly neutral adding 2,000 jobs.
Wage growth was lower than expected at 0.1% m/m versus the expected 0.2% m/m. Last month was revised higher to 0.3% m/m, however, from 0.2% m/m previously. Overall wage growth is hovering around 2% y/y up from low levels a year ago at just above 1% y/y.
Danske Bank