US job growth sluggish pre-election but unemployment rate budges

Added 4th November 2016

Friday’s non-farm payroll release was a mixed bag but analysts were encouraged by the drop in unemployment levels.

US job growth sluggish pre-election but unemployment rate budges

October saw the lowest number of jobs added to the economy in five months with only 161,000 new jobs added compared with 191,000 the month before. The numbers also undershot market expectations of 175,000 new jobs, and were below the yearly average of 181,000 jobs per month.

Despite the this, employment in the healthcare sector continued to trend upward, adding another 31,000 positions in October. Professional and business service roles, which have risen by 542,000 so far this year, brought a further 43,000 jobs. The financial services industry also generated 14,000 new jobs during the month.

Job creation in other sectors like mining, manufacturing and retail trade, which have been highlighted as particularly vulnerable during the election cycle, remained static.

However, the rate of unemployment in October dipped back down again to 4.9% from September’s 5%.

That is why even though the US endured a ‘slight miss’ on the payroll front, Foenix Partners head of dealing Alex Lydall suspects this is “unlikely to derail ambitions of a December rate hike.”

“Despite the pantomime-like affairs in the Presidential race set to conclude next week, the modestly lower Non-Farm figure was coupled with a solid Unemployment rate and a growing hourly wages level, likely to prevent a further sell-off in the greenback that we saw yesterday,” he explained. “Janet Yellen subtly hinted on Wednesday evening what most investors are forecasting - a December hike - and in the absence of any shock data in the coming weeks the path appears to be set. Markets are tentatively poised for the announcement of the next US President, with the poignant question being; is the reaction on currencies a move depicted in the greenback or more a risk-related asset move.”

Royal London Asset Management economist Ian Kernohan was likewise encouraged that the “reasonably robust payrolls report” would keep the Fed on track to hike rates next month. “The key figure, the three month moving average of employment growth now stands at 175,000, with signs that falling unemployment is now feeding into stronger wage growth,” he said.  

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