US unemployment figures missed expectations today, jumping to 4.3 per cent, leaving analysts asking if the Federal Reserve had made a mistake not to cut interest rates on Wednesday.
Nonfarm payrolls in the country increased by 114,000 last month, far below the 175,000 expected by economists. Meanwhile, June’s figures were revised down from 206,000 to 179,000.
“US employment data couldn’t have been released at a more sensitive time; markets are wobbling, concerns over Fed policy abound and corporate earnings are in the spotlight,” said Neil Birrell, chief investment officer at Premier Miton Investors.
Today’s data has fanned the flames over fears of a recession in the world’s largest economy, with the FTSE 100 dropping 0.6 per cent and Europe’s Stoxx 600 falling 0.7 per cent directly after the data was released.
The Fed decided to hold interest rates in place earlier this week, despite suspicion that the US labour market was beginning to stop excelling in strength.
“Oh dear, has the Fed made a policy mistake?” asked Seema Shah, chief global strategist at Principal Asset Management.
“The labour market’s slowdown is now materialising with more clarity,” she said, noting that job gains dropped below the 150,000 threshold that would be considered consistent with a solid economy.
Shah now described a September cut from the Fed as “in the bag,” and markets agreed: They now forecast a 70 per cent chance of a 50 basis point cut to rates, up from just 22 per cent yesterday.