US jobs data point to continued tightening from Fed

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Growth in the US jobs market is slowing but an unexpected drop in the unemployment rate has fuelled expectations that the Federal Reserve will continue with its aggressive tightening of monetary policy.

Non-farms payroll data showed the economy added a better than expected 263,000 jobs in September, but with the unemployment rate falling from 3.7 per cent to 3.5 per cent. The report sent stocks and government bond prices lower as investors banked on another 0.75 percentage point rise in interest rates from the Fed next month.

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Separate data yesterday showed higher than expected first-time jobless claims for the week ending October 1 while figures earlier in the week showed US employers cut more than 1mn vacancies in August, one of the biggest monthly drops in two decades of data analysed by the Financial Times, pushing the ratio of job vacancies to unemployed people from 2 to 1.7.

Workers are however still quitting at a high rate, suggesting that labour supply and demand remain out of balance. New figures from the Job Openings and Labor Turnover Survey (Jolts) had also indicated the employment market could be slowing.

Fed officials yesterday pushed back against speculation they might pause their monetary tightening campaign, stressing the need for more interest rate rises.

They argue rises in unemployment will be limited as employers will be hesitant to shed workers in the face of widespread labour shortages. The labour force participation is still below its pre-pandemic level, at 62.3 per cent.

“It’s too early to expect a pivot at the Fed level,” said one investor. “The bar is so high. We’d need a labour market that’s weaker, inflation coming down, some stress in the market or some sort of accident. We’re not there yet.”

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Need to know: the economy

IMF chief Kristalina Georgieva warned the global economy would feel like it was in recession next year from “shrinking real incomes and rising prices”. Her remarks suggest the fund will downgrade its economic forecasts again next week, for the fourth consecutive quarter.

Latest for the UK and Europe

The fallout from chancellor Kwasi Kwarteng’s “mini” Budget continues. The Bank of England said its £65bn gilt intervention staved off a financial “spiral” and one of its deputy governors said policymakers must “stay the course” on inflation. Former US Treasury secretary Larry Summers said “the destabilisation wrought by British errors will not be confined to Britain”. Undercover Economist Tim Harford offers five ideas that might actually boost UK growth.

Economics reporter Valentina Romei delves into the data showing the serious effect of the cost of living crisis on British households, which, according to new think-tank analysis, will lose more than they gain from the government’s planned tax cuts. Winter power cuts could also be on the cards unless energy use is reduced.

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Norway and the EU agreed “joint tools” to help cut gas prices and stabilise energy markets. Belgium’s prime minister told the FT that without intervention, Europe was risking “massive deindustrialisation”. The German energy package is still dividing the bloc, with Poland arguing it could destroy the EU single market.

Global latest

The US said “nothing was off the table” as it considered its response to the Opec+ cut in oil production. Learn why the announcement has sent out shockwaves across the world by reading our explainer.

The Bank of England’s emergency intervention to support pension funds is just one example of growing jitters among international investors. US editor-at-large Gillian Tett outlines four flashpoints that could threaten financial stability.

China’s strict zero-Covid policy has severely disrupted the tourist industry’s “golden week,” a seven-day holiday around the country’s National Day to celebrate the modern nation’s founding.

In the first of three films based on her new book, global business columnist Rana Foroohar takes a trip across the US to see how neoliberal economic thinking has broken our food supply chains — and what can be done about it.

Need to know: business

The UK started a new round of licences for North Sea oil and gas in an attempt to boost energy self-sufficiency, but is being challenged by environmental campaigners. Shell, Europe’s biggest oil and gas company, signalled an end to its record-breaking profit run after lower refining and chemicals margins and weaker gas trading in the third quarter.

UK business leaders, faced with imposing record price rises to offset higher wage bills, called on the Tories to stop infighting and concentrate on the economy.

Samsung, the world’s largest memory chipmaker and smartphone producer, was hit by its first profit fall in three years, highlighting the slowdown in demand for electronic devices. It follows gloomy updates from Micron and AMD in the US and Japan’s Kioxia.

Why is Big Tech needlessly destroying millions of data storage devices when they could be wiped clean safely and securely and sold on the secondary market? Our Big Read investigates.

In more positive tech news, west coast editor Richard Waters reports on a significant breakthrough in artificial intelligence. Generative systems — ones that automatically produce text and images from simple text prompts — have advanced to a level where they could have wide-ranging business uses.

Science round up

Covid-19 infections have risen in England and doubled in Northern Ireland, as the latest wave of the pandemic spreads. An estimated one in 50 people tested positive in England in the week to September 24, up from one in 65 in the previous week, while in Northern Ireland the figure rose from one in 80 to one in 40. The trend was less clear in Wales and Scotland.

Molnupiravir, Merck’s Covid-19 antiviral pill, did not cut the risk of hospitalisation, according to a new study. Dr Andrew Hill from the University of Liverpool said: “We have seen this situation before with other Covid-19 drugs like remdesivir. Early results looked encouraging, but then larger trials showed no benefit.”

Moderna has refused to reveal its mRNA vaccine technology to China because of commercial and safety concerns. The mRNA-based jabs provide better protection than those offered by Chinese pharma companies that have struggled with more infectious variants of coronavirus.

The UK launched its Covid inquiry, enabling members of the public and specialists to give evidence on Britain’s response and preparedness for the pandemic.

Three scientists won the Nobel Prize in Physics for their work on “entangled” particles, an idea Einstein once dismissed as “spooky action”.

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Some good news …

A 230mn-year-old fossil unearthed a century ago in Scotland has enabled scientists to reproduce the skeleton of a Scleromochlus, a cousin of the pterosaurs. The study, published in Nature, suggests the first flying reptiles may have evolved from creatures similar to this tiny, bipedal runner.