(Reuters) - U.S. employers slammed the brakes on hiring over the last two months and wages fell in September, raising new doubts the economy is strong enough for the Federal Reserve to raise interest rates by the end of this year.
* Payrolls outside of farming rose by 142,000 last month and August figures were revised sharply lower to show only 136,000 jobs added in August, the Labor Department said on Friday.
* That marked the smallest two-month gain in employment in over a year and could fuel fears that the China-led global economic slowdown is sapping America’s strength.
TONY BEDIKIAN, MANAGING DIRECTOR OF GLOBAL MARKETS, CITIZENS FINANCIAL GROUP, BOSTON:
“Kind of a 1-2 punch certainly to the economic bulls out there and also those that were anticipating a Fed hike earlier rather than later. Market participants in general will look at this number and say this probably pushes out the probability of a Fed tightening to beyond the October meeting.
“Over the last couple of months, when we have a risk-off trade which is happening at the moment, you typically see dollar weaker versus euro and sterling, and emerging market currencies trading weaker versus the dollar. I wouldn’t be surprised to see that kind of trade continue, assuming this risk-off trade (holds) today and perhaps going forward. It is going to be an interesting and volatile day.”
KATE WARNE, INVESTMENT STRATEGIST AT EDWARD JONES IN ST. LOUIS:
“It was a bit of a surprise because not only was it much weaker than expected but July and August were revised down and not up, so it clearly suggests the economy is a bit weaker than expected. But the takeaway isn’t a faltering economy, it’s that we’ve seen growth slow before and the underlying strength in consumer spending is likely to continue to push growth at about the 2 percent pace we’ve seen throughout the six years of the expansion.
“Everyone was hoping the rebound in the second quarter would follow on into stronger growth and unfortunately that is not the case. While stocks are clearly down in response, there are two other things to pay attention to: One is it makes it much less likely the Federal Reserve starts to hike short term interest rates over the next few months, but I don’t think it removes the Fed’s intent to move rates above zero at some point in the future. The second thing is even with downward revisions and slower growth, this isn’t a precursor to a recession, it is more of the same slow, sluggish, erratic growth that we’ve seen.”
“It’s an absolutely weak report all around, even some of the things we like to look at beneath the surface don’t really ring in a positive way. It’s a soft report.
“Like any good central banker they are not going to let one report dictate, but the reality is for this Fed they are considering a broader array of inputs, not just U.S. data, so if you have a weak report here in combination with some of the other weakness that we are seeing across the globe, the odds (of a rate hike) get dinged for December.”
VASSILI SEREBRIAKOV, CURRENCY STRATEGIST, BNP PARIBAS, NEW YORK:
“This is a weak report that will probably push back the timing of the Fed rate hike to 2016. The dollar will suffer the most against the yen in the short term, although not really against commodity currencies because I would imagine this data would be negative for risk sentiment.”
BRIAN JACOBSEN, CHIEF PORTFOLIO STRATEGIST, WELLS FARGO FUNDS MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
“The economy isn’t as insulated as many would like to believe. The August number was revised lower. The September number was below expectations. Average hourly earnings didn’t improve. The manufacturing workweek shrank. You can’t throw lipstick on this pig of a report.”
STOCKS: U.S. stock index futures dropped sharplyBONDS: U.S. bond prices rallied FOREX: The dollar fell sharply against the dollar and yen
Americas Economics and Markets Desk; +1-646 223-6300