Economic Views

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

There was no silver lining in today’s non-farm payrolls report. 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 labor market has slowed dramatically. Though the unemployment rate remained constant at 5.1%, this was largely a function of participants dropping out of the labor force. Average hourly earnings growth was flat on the month, with inflation adjusted wages 2.2% higher than a year ago.

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.