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US Non-Farm Payroll – the number of people who gain employment in manufacturing & services in the US economy (the farming sector is excluded due to seasonal hiring patterns in that sector) is released on the first Friday of every month and is the leading US economic indicator showing the strength or not of labour hiring i.e. it indicates the strength of the US economy, the largest in the world – and so it is globally important economically.

The latest figure was released on Friday October 7th. The data showed that US employers added 263,000 new jobs in September, down from 315,00 in August but above the figure of 250,000 anticipated by economists. So, the figure was stronger than expected.

The report also showed that the rate of unemployment had dropped unexpectedly to 3.5 per cent, from 3.7% a month earlier.

Investors have scrutinised jobs data in recent months for clues about the future direction of US monetary policy.

Note: If labour hiring figures are strong that means the economy is strong and inflation is not coming down anytime soon. Inflation in the US is a red hot 8.26% well above the central bank’s 2% target.

The temperature of the labour market is seen as a key influence on decision-making by the US Central Bank – the US Federal Reserve or ‘The Fed’ for short’. Signs of labour robustness typically fuels expectations that the central bank will continue with aggressive interest rate rises.

Futures markets are pricing in the probability of the Fed raising interest rates by 0.75% in November, which would mark the fourth consecutive increase of such magnitude. The central’s bank’s current target range stands at 3 to 3.25%.

Friday’s figures were ‘hawkish’ (opposite of ‘dovish’) meaning unfriendly for the markets with interest rates going up.

US/global equity markets fell sharply on the release of such data – down 2/3% and down 20/25% for the year-to-date as higher interest rates are bad news for stock markets as

-They increase the cost of corporate borrowing

-They slow the economy/consumer spending so reducing corporate profitability

They make investing on other products like bonds (paying 3 – 5% interest) relatively more attractive i.e. investors sell equities and buy bonds.

US and Global employment data and inflation data remains all important for the markets.