Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
‘’Worries are firing in from all fronts following the latest robust snapshot on the US labour market. Investors are simultaneously fretting that the fall in the pace of hirings indicates a slowing economy, but also that the better than expected data shows that the jobs markets hasn’t slowed enough to stop the Fed from hiking rates aggressively. Non-farm payrolls increased by 263,000 in September, compared to a consensus estimate of around 250,000, whereas in August hirings rose by 315,000. Crucially though, the unemployment rate came in at 3.5%, down from 3.7% showing how resilient the labour market still is to the ramping up in interest rates. Caution appears to be rising a little among employers but it’s clear a fight for talent is still on, with many companies hesitant about reducing headcount as a precaution even as customers start reining in spending and worries rise about the outlook ahead. We’re in a topsy-turvy world where signs of a resilient economy is taken as bad news by the market, such is the sensitivity surrounding the expected moves by central bankers right now. S&P futures fell 1.3% after the data came through and futures linked to the Nasdaq dropped by 1.8%. Worries are also focused on wage growth remaining pretty sturdy with average hourly earnings increasing by 0.3%. Although annual wage growth has slowed, warmth is still radiating in the economy so the Federal Reserve is still expected to put its foot on the gas of rate rises, in its attempt to bring inflation down to its target, with another 0.75% hike expected.’’
