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Non-farm payrolls more than disappoint

Published Monday, October 5th, 2015

Christine Lagarde will be satisfied that the NFP numbers were so comprehensively bad that the chances of an imminent US rate increase are considerably reduced giving emerging market economies a breathing space. On the other hand she will be concerned that the one region the IMF thought was doing well appears to be stumbling. This week’s IMF gathering in Lima is going to be very gloomy, beginning with a global growth downgrade which should now have the ubiquitous phrase ‘with downside risk’ added.

Janet Yellen will also have mixed feelings. A number of 142,000 against expectations of 203,000 and with August cut back to 136,000 is a real shocker. She and her colleagues will be confused, worried and they should also be a little embarrassed. They are the experts with all manner of information available to them and they did not see it coming, quite the contrary, as far as the Fed was concerned the US economy has been doing just fine and it is the world outside where the dangers lie. On the other hand the FOMC could be relieved at having been given the perfect excuse not to increase rates this year, which so many are advising will trigger an emerging market financial crisis.

Not surprisingly investors are thoroughly confused as well and they showed it dramatically on Friday after the release of the figures. Such awful numbers signal an economy slowing down, so the first reaction of the US markets was to sell off. On second thoughts it means low interest rates for longer which brought in buying, particularly of energy and other commodity related stocks which benefit from a weaker dollar.

to read the rest of the report, please click here

Posted by David Hufton