Dollar strengthens after US beats forecasts with 254,000 new jobs in September – as it happened

Time to wrap up, after a lively week.

American employers added 254,000 jobs last month in the penultimate jobs report before the US election, defying fears of a slowdown in the labor market.

Job creation unexpectedly accelerated in September, while the headline unemployment rate slipped to 4.1% from 4.2% in August.

Economists had forecast a non-farm payrolls reading of around 132,500 for September, after a cooler summer of employment growth.

Hiring instead rose sharply from recent months. In August employers added 159,000 jobs, and in July, they added 144,000.

Both estimates for July and August were revised higher by the Bureau of Labor Statistics on Friday – adding 72,000 more jobs than previously reported – highlighting the strength of the labor market.

The strong jobs report lifted shares on Wall Street, and sent the dollar flying to a seven week high, dragging down the pound.

Sterling is now firmly on track for its worst week since February 2023, having dropped by around 2% or two and a half-cents this week.

It had rallied, before the jobs report, after the Bank of England’s chief economist warned against cutting interest rates “too far or too fast”.

Huw Pill said there should be a gradual reduction in interest rates to make sure inflation remains near the Bank’s 2% target, a day after the governor, Andrew Bailey, said the central bank could move “more aggressively” to lower borrowing costs.

In a boost for the UK’s Labour government, the UK construction sector grew at its fastest pace in two-and-a-half years in September, as housebuilding strengthened.

Here’s the rest of today’s business news:

President Joe Biden has welcomed today’s jobs report, saying:

Today, we received good news for American workers and families with more than 250,000 new jobs in September and unemployment back down at 4.1%. With today’s report, we’ve created 16 million jobs, unemployment remains low, and wages are growing faster than prices.

Under my Administration, unemployment has been the lowest in 50 years, a record 19 million new businesses have been created, and inflation and interest rates are falling.

And we’re seeing the power of collective bargaining to lift up workers’ wages—including the progress made by dockworkers on record wages with carriers, and port operators and the reopening of East Coast and Gulf ports.
Make no mistake: We have more to do to lower costs and expand opportunity. Congress should pass our plan to build millions of new homes, expand prescription drug price caps, empower workers and protect the right to organize, and cut taxes for hardworking families.

Congressional Republicans have a different plan—more giant tax cuts for billionaires and big corporations, ending the Affordable Care Act, undermining workers by cutting overtime and making it harder to organize, and imposing a national sales tax that would raise costs by nearly $4,000 per year. While they put billionaires first, we’ll keep fighting to grow the middle class.

Stocks have jumped on Wall Street at the start of trading, as investors hail today’s stronger-than-expected US jobs report.

The Dow Jones industrial average gained 233 points at the open, up 0.55% to 42,244 points.

The broader S&P 500 index gained 0.75%, while the tech-focused Nasdaq is up 1.2%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, says hopes are rising for a “goldilocks scenario” for the US economy, explaining:

“The US jobs market appears to have been infused with confidence in September, with new hirings shooting past expectations and the unemployment rate edging down. Fed policymakers had been worried about the potential for the jobs market to rapidly cool off, which is why they opted for a super-size rate cut last month. These latest numbers will help assuage those worries and add to a picture of a resilient US economy, which appears to be heading for a soft landing.

Financial markets are pricing in the chances of a cut in November at 93%, but are putting bets on a more usual 0.25% reduction. As expectations have retreated for a bigger rate cut, it’s helped push the dollar to a seven-week high, and Wall Street looks set to end the week on an upbeat note.

Neil Birrell, chief investment officer at Premier Miton Investors, says:

“That was quite some jump in US payrolls in September, almost off the scale relative to expectations, and earnings were up more than anticipated as well. This is without question a strong jobs report.

“US employment data has been the focal point for bond and equity markets for the last two months and that will continue to be the case as everyone tries to second guess Fed policy. As it stands, a 0.5% cut must now be off the cards at their next meeting, although we do have one more jobs report before then – guess what we’ll all be looking at!”

Richard Flynn, managing director at Charles Schwab UK, agrees that the jobs report is stronger than expected:

“Today’s jobs figures have exceeded expectations, indicating a high level of demand in the labour market, reversing a recent trend. At the last Fed meeting, Jerome Powell emphasised that the slowdown in job growth was the key factor behind the decision to kick off the easing cycle with a larger-than-normal rate cut. Powell indicated that the “balance of risks” to the US economy has shifted—implying that supporting the job market has taken precedence over fighting inflation.

Today’s jobs figures suggest the Fed’s action is working well to support its full-employment mandate. With high inflation largely in the rearview mirror, this could be less good news for markets, as it may slow the pace of future rate cuts.”

Seema Shah, chief global strategist at Principal Asset Management, says such a strong jobs report means the Fed can’t consider another large cut to interest rates at its next meeting:

“Did the Fed even need to cut rates in September, let alone cut by 50bps?

The monster upside surprise suggests that the labor market may actually be a picture of strength, not weakness, and it completely dismisses the idea that the Fed could even contemplate another 50bps cut in November.

As jobless claims, the Challenger survey, and the multitude of strong economic data have been suggesting, the U.S economy is still robust. And with Fed easing now underway, recession risk has collapsed. Markets will need to keep a closer eye on inflation as, now, there are policy risks on both sides of the economy.”