It’s a big day for the financial markets today, with one of the most highly anticipated reports due.
Of course, this is all about the September non-farm payrolls in the United States. Investors had expected about half a million Americans to have found jobs last month. Their expectations were further heightened by positive ADP and jobless claims data earlier this week.
However, the actual NFP data was a huge disappointment, coming in at 194K, or less than half of the jobs expected. This let down shows that the US labor market is not performing as expected and is still troubled by the ongoing coronavirus pandemic.
Somewhat surprisingly, the unemployment rate in the United States dropped more than expected last month, retreating to 4.8%. There was also better-than-anticipated wage growth.
Still, the negative effect of the weak non-farm payrolls data is likely going to be larger than the positive impact of all of the other labor reports from the US.
The disappointment of the NFP report is likely going to pressure the Federal Reserve into keeping its monetary policy loose for longer than expected. If the next inflation rate is also below the forecasts, then it will be less likely for the Fed to cut back its asset purchases in November.
In other news, things appear to be calmer in China. Despite the looming default of Evergrande Group, right now Chinese stock indices seem stable and are recording a slight growth. Many businesses were closed for a prolonged holiday period, but are now returning back to normal in an uplifted mood.
The energy crisis pestering Europe and the United Kingdom might be the next big issue for China, whose multiple factories account for the most demand for fuel in the world. But so far, the Chinese government has tried to keep things steady. It remains to be seen for how long.
As for the stock market, US indices were mostly holding flat before the publication of the NFP report. Now they might strengthen because the disappointing labor market data means stimulus from the Federal Reserve might last longer than anticipated.
