US unemployment declined to 7.9% in September from 8.4% in August, beating expectations, but non-farm payrolls only rose by 661,000 – well below hopes for 850,000. Market consensus is that this slowdown in hiring growth represents a fragile US economy which is vulnerable to renewed setbacks.
However, as some commentators have noted, unless the number of new jobs added each month starts levelling off, we will soon reach a point where more-than 100% of the population is in employment! We should expect to see deceleration in growth in job additions, which is what we are seeing.
Also important is wage growth, alongside the fact that the US savings rate in August was double (14.1%) its pre-pandemic level. Higher wage growth (for those with jobs) coupled with higher household savings could go some way to compensate for a lack of government stimulus before the election.
In other US data, service sector activity is continuing to grow at a solid rate, and manufacturing output has expanded by the most since November 2019. The ISM Current Conditions Business Index has jumped from 42.9 in August to 56.1 in September – that’s the steepest improvement in New York business conditions since April 2019. And the University of Michigan’s Consumer Sentiment Index stood at 80.4 for September – its highest reading since March 2020.
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