Schroders Quickview: US jobs report reduces chance of imminent rate hike

Worse than expected US jobs numbers have pushed out expectations for the first Federal Reserve rate rise.


Lisa Hornby

Lisa Hornby

US Fixed Income Portfolio Manager

  • US non-farm payrolls miss expectations
  • US adds 142,000 jobs vs 201,000 forecast
  • Unemployment rate remains at 5.1%
  • Average hourly earnings flat
  • Markets price in the prospect of a delayed rate rise

Downward jobs revisions a concern

There was no silver lining in today’s non-farm payrolls report1.

The US economy added 142,000 jobs during the month of September, well below consensus expectations of for 201,000.

More worryingly, there were downward revisions to the prior two months' figures, implying that the recent momentum in the labour market has slowed dramatically.

Though the unemployment rate remained constant at 5.1%, this was largely a function of participants dropping out of the labour force.

Average hourly earnings growth was flat on the month, with inflation adjusted wages 2.2% higher than a year ago.

Interest rate expectations pushed out

This report certainly reduces the likelihood of a near-term rate hike by the Federal Reserve.

Market participants responded accordingly by pushing out the expected date of the first rate hike and the yield curve steepened.

Yields on 10-year Treasuries fell by approximately 10 bps, with the 10-year yield falling well below 2%.

Equity markets fell by about 1.5 % on the open following the release.

1. Non-farm payrolls are reported by the U.S. Bureau of Labor Statistics and are intended to represent the total number of paid U.S. workers of any business, excluding: general government employees, private household employees, employees of nonprofit organizations that provide assistance to individuals and farm employees.