Konjunktur USA

Uninspiring US payrolls means no taper by Fed just yet

Equities, bonds, gold all jump following the delayed US nonfarm payrolls report for September. EUR/USD inches up, USD slapped a tad – DJIA futures up 50 points while S&P500 futures up 5.50 points. US added 148k jobs last month, below forecasts for around 180k. The unemployment rate did drop to 7.2% from 7.3%, better than forecast and the lowest level since November 2008.

 

Overall, a neutral and somewhat expected payrolls report with jobs growth momentum still slow but jobless rate dipping – the participation rate held at 63.2% last month, staying at a 35 month low. The August figure was revised higher to 193k from 180k which in some ways offset the below-forecast headline job number in September.

 

So when reading these figures, the key take-away is that jobs growth momentum still slower than anticipated, pre-US shutdown – and is consistent with the momentum through most of the second half of this year – goldilocks reports. The jobless rate did indeed tick down but still above 7% - it’s likely the Fed will not be convinced to taper while the jobless rate remains stuck above 7%.

 

All of this spells taper-off – jobs generation remains weak, other facets of the US economy are also suffering from weakness – yesterday’s weaker existing home sales report for example and more importantly, fiscal uncertainty in the US remains. Lawmakers will have to re-address the debt limit and funding for the Treasury early next year; this makes the Fed’s job much harder in terms of an exit plan for QE.

 

At the same time, if the trigger is not pulled by current head Ben Bernanke before he leaves at the end of 2013, it will be the duty of the incoming Fed President who could be Janet Yellen – an endorser of loose monetary policies [low interest rates and accommodative easing tools], otherwise known as a dove in the market. QE infinity – unlikely the Fed have a convincing enough case to taper just yet – most likely mid-2014 or late before we see the first tapering shot fired. Risk assets are to remain well supported through to year-end; S&P500 to hit 1810 by end of 2013, FTSE100 to hit 6850.