US jobs market tighter than expected

US jobs market tighter than expected
By Daniel Pimlott and Michael Mackenzie in New York
Copyright The Financial Times Limited 2006
Published: October 6 2006 13:34 | Last updated: October 6 2006 13:34



Fewer US workers than expected found jobs last month, but a fall in the jobless rate and an unexpected upwards revision to overall employment numbers suggested that the labour market is tighter than previously thought.

Just 51,000 jobs were added in September, below an expected increase of 125,000 to the non-farm payroll. But changes to the previous two months reports added an extra 61,000 jobs, while the benchmark employment numbers to March of this year were revised upwards by 810,000, or 0.6 per cent.

This was the largest change to the estimate of overall number of workers employed in the US in more than ten years, and three times larger than the average amendment over the decade.

Meanwhile, the unemployment rate dropped from 4.7 per cent in August to 4.6 per cent last month and hourly wages grew by 0.2 per cent.

Some analysts said that the revisions and unemployment figure represented a stronger employment situation which vindicates the Federal Reserve’s hawkish line on inflation.

“A few key aspects of the report are strong and will add to fears that labour market resources are tight and will keep the pressure on the Fed to err on the side of tightening,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital.

The revision to the benchmark figure points “to a much more vibrant labour market in the not too distant past than had been reported earlier” said Joshua Shapiro, chief US economist at MFR.

It also brings the data into line with the household employment survey which has shown faster employment growth than the payrolls survey in recent months.

“A still-declining unemployment rate dashes the notion that the Fed might be cutting interest rates soon,” said Nigel Gault, US economist at Global Insight.

But other economists questioned the reliability of the data.

“We are skeptical, given the quality of the data,” said Mike Englund, an analyst at High Frequency Economics. “In any event we expect an unambiguously sharp slowing; the Fed will have no choice but to ease.”

US bond yields slipped on the release of the report.

“The bond market was looking for further signs of moderation and didn’t get it,” said Kevin Flanagan, fixed income strategist at Morgan Stanley.

The revisions for prior months and fact that wage growth is now running at 4 per cent year over year, “does not confirm the market perception the Fed will be easing sooner than later,” said Flanagan.

The report on the US job market also indicated that people evacuated as a result of Hurricane Katrina are still struggling to find work a year on.

The unemployment rate evacuees was 8.3 per cent in September. But the rate was much higher for evacuees who were not living in their old homes (14.5 per cent) than for those who had moved back in their pre-Katrina residences (4.7 per cent).