Non-farm payrolls beat expectations, unemployment rate dips

The US economy added far more jobs than expected in September while the unemployment rate unexpectedly fell, dashing any expectations of a potential 50 basis points rate cut by the Federal Reserve next month.

Figures released by the Labor Department showed that total non-farm payrolls rose by 254,000 from August, versus expectations for a 140,000 increase. The figure for August, meanwhile, was revised up to a 159,000 gain from 142,000.

The unemployment rate fell to 4.1% in September from 4.2% the month before. Economists were expecting it to be unchanged.

The data also showed that wage growth ticked up to 4% year-on-year from 3.9% in August. On a monthly basis, wages were up 0.4%, in line with August.

Paul Ashworth, chief North America economist at Capital Economics, said: "Looking at the labour market strength evident in September’s Employment Report, the real debate at the Fed should be about whether to loosen monetary policy at all. Any hopes of a 50bp cut are long gone. We continue to expect the Fed to take a more measured approach - cutting rates by 25bp at each meeting until the policy rate is down to between 3.00% and 3.25%."

Mahmoud Alkudsi, senior market analyst at ADSS, said: "Today’s promising data could suggest that heavy-handed slashing of interest rates provided some rigidity to a somewhat fragile jobs market.

"With data coming in significantly stronger than anticipated, the Fed is likely to continue cutting rates at a slow and steady pace, with a 25-basis-point reduction in the November meeting being the most probable outcome.

"This scenario may prompt investors to scale back their excessive expectations of a near 70-basis-point cut by year-end, which could offer short-term support for the US dollar, while posing more challenging conditions for the recently volatile equity markets."