September Nonfarm Payroll Data and Market Reaction in the United States
On October 6th, the US Bureau of Labor Statistics released the September Nonfarm Payroll data. The US added 336,000 jobs in September, significantly surpassing the expected 170,000 and the previous value of 227,000. The unemployment rate for September was also announced at 3.8%, slightly higher than the expected 3.7% but in line with the previous value.
The largest sector for job additions in September was still the service industry, with 234,000 new jobs. Following that was the government sector with 73,000 new jobs, and the goods-producing sector with 29,000 new jobs.
In the goods-producing sector, manufacturing had the largest share with 17,000 new jobs, a slight increase from the 11,000 added in August. However, it is important to note that a major auto industry strike by the United Automobile Workers Union (UAW) began in mid-September. Since the start of the strike, nearly 5,000 auto workers have been laid off by car manufacturers. The negative impact of the strike has not yet been reflected in this month’s nonfarm payroll data, and it is expected to affect the manufacturing sector in the October data.
In the service industry, the largest contributor to job additions was the leisure and hospitality industry with 96,000 new jobs. This was followed by the education and healthcare industry with 70,000 new jobs, and the professional and business services sector with 21,000 new jobs. The information industry showed a weak performance in job additions, with a decrease of 5,000 jobs since May.
On October 4th, the largest private healthcare organization in the US, Kaiser Permanente, began a strike involving approximately 75,000 employees. This is the largest strike in the US healthcare industry in recent years. The healthcare industry has been an important factor in driving job additions in the nonfarm service sector in September, and if the strike continues, it will pose downside risks to nonfarm service job additions in October.
The strong nonfarm payroll data in the past two years in the US has been driven by an increase in the labor force. However, due to the impact of the COVID-19 pandemic, the US labor force has seen a significant decline, with a decrease of 3.947 million people by the end of 2020. As the pandemic’s impact diminishes and the US government reduces transfer payments to residents, some of the population will enter the labor market, sustaining the hot labor market in the US.
Following the release of the better-than-expected nonfarm payroll data, the price of the 10-year US Treasury bond initially declined but rebounded, indicating a decline in the yield. At the same time, the US dollar index showed a rapid increase followed by a decline. We believe that the market pricing on that day reflected expectations of a weaker labor market in the background of the ongoing strikes in the US. Looking at one of the monetary policy objectives, i.e., the labor market (employment), the expectation of further tightening by the Federal Reserve has weakened.
US September PPI: Reacting to energy prices
Influenced by energy prices, the US September PPI data exceeded expectations. The September PPI YoY was 2.2%, higher than the expected 1.6% and the previous value of 2%. The September core PPI YoY was 2.7%, higher than the expected 2.3% and the previous value of 2.5%. The September PPI MoM was 0.5%, higher than the expected 0.3% but lower than the previous value of 0.7%. The September core PPI MoM was 0.3%, higher than the expected and previous value of 0.2%.
The YoY value of the core PPI continued to slow down, while the overall PPI continued its rebound since June. Looking at the sub-items, in the final demand for