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US September payrolls: Low, but not enough to delay the taper

The US economy added just 194 000 jobs in September, falling well short of consensus expectations of around 500 000 and marking the weakest pace of job creation this year. August had seen 366 000 new jobs after more than one million in July.  

Our view is that the latest jobs report reflects the disruption to the US economy caused by the Delta variant of Covid-19 over the summer. Data for September’s report was collected in mid-September when the Delta wave was near its peak.

This showed up in leisure and hospitality businesses, which had been a significant driver of job growth earlier this year. Here, fewer than 100 000 jobs were added in August and September. While Delta’s economic impact has been significant, the variant has nonetheless been contained. Construction companies and manufacturers reported strong job growth despite supply-chain difficulties, and retail hiring rebounded after two months of declines.

The biggest drag on employment was in the public sector. Government payrolls shrank by 123 000, with most of the losses in education. This decline appears to reflect the way the US Labor Department accounts for seasonal patterns, which the pandemic disrupted.

On an unadjusted basis, federal, state and local government employment actually grew by close to 900 000 in September. As that is fewer than in a typical September, the seasonal adjustment formula interprets it as a loss in jobs.

Overall, the September payrolls data was probably not the clear-cut report the US Federal Reserve might have had hoped for. Nonetheless, we think the job gains were sufficient to open the way for the central bank to announce a tapering of its asset purchases at its policy meeting in November.

Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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