The US economy added 194 thousand jobs in non-farm sectors in September. Expectations were for 500k jobs, so the data could be a disappointment, showing that the US labor market is improving at a slower pace than expected.
The figure of less than 200k is the worst reading this year. According to the data, the largest job gain in September was in the leisure and hospitality sector at 74k, while professional and business services added 60k jobs, retail trade 56k, and transportation and warehousing 47k. Healthcare employment fell by 18k, while public education fell by as much as 161k.
The slow growth in new jobs means that the U.S. economy still hasn't returned to pre-pandemic employment. About 5 million jobs are still short of that mark. In contrast, more than 17 million jobs have been recovered since April. The unemployment rate, meanwhile, fell to 4.8 percent from 5.2 percent a month earlier and is the lowest since March 2020. Before the epidemic crisis, the unemployment rate was at 3.5 percent.
Market reaction after NFP
A major data reading far below market expectations may have led to a weaker US Dollar. The EUR/USD main pair has risen since this morning from the region of 1.1540 to 1.1585, despite the fact that the interest rate market still believes that hikes could take place in 2022 and tapering will be done by the end of the year.
On the other hand, we can observe a much bigger reaction in the precious metals market. The price of gold seems to have risen from around USD 1760 to USD 1780, while the price of silver has risen from around USD 22.5 to over USD 23 per ounce. The lack of rapid improvement in the labor market along with a significant increase in the cost of doing business may cause concerns about the economic situation, including potential stagflation in the US. Added to this is the possible increased supply of debt by the U.S. Treasury Department to ensure that the federal government is funded for longer than just December.
In the stock market, on the other hand, US index futures seem to be on the rise. The Nasdaq index contract appears to be up almost 0.5 percent, S&P 500 futures are up 0.3 percent, while DJIA futures are up 0.1 percent. Perhaps some of the bulls believe that weaker labor market data will prevent the Fed from tapering and raising rates quickly, which will ultimately extend the significant stimulation of financial markets and provide further prolonged and cheap financing.
Daniel Kostecki, Conotoxia Ltd.
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