US Fed may skip October rate hike as labour market cools more than expected

US employers added just 29,000 jobs in September, well below expectations, while the unemployment rate rose to 4.2 per cent, weakening the case for an October rate hike

United States (US) Federal Reserve policymakers on Friday got more reason to wait before raising interest rates again, as government data showed the labour market is cooling more than expected.

 

US employers added just 29,000 jobs last month, the Labour Department reported, less than the 90,000 economists had expected. August payroll gains were revised downward. The unemployment rate ticked up to 4.2 per cent from 4.1 per cent.

 

The Fed raised short-term borrowing costs by a quarter of a percentage point last month to help get inflation back on track to 2 per cent. Policymakers signalled they will likely deliver another rate hike by year-end if the Iran war and other shocks that have pushed up inflation persist, as long as the labour market holds up.

 

 

After the data on Friday, interest-rate futures contracts were priced for less than a one-in-five chance of a rate hike at the Fed’s October meeting, down from more than one-in-four previously. Traders also eased bets on a December rate hike, though that is still priced at a nearly 90 per cent probability.

 

Hiring dropped from a revised 133,000 in August, the Labour Department reported.

 

Friday’s jobs report is the last one that will come out before the November 3 elections that will determine whether President Donald Trump’s Republicans maintain full control of Congress.

 

Futures for the S&P 500 and Nasdaq Composite added to their gains after the data was released, while Treasury yields moved lower. The yield on the 10-year Treasury was 5.17 per cent, down from 5.24 per cent a day earlier.