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.

5 October 2015

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.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.