Weak Job Numbers Raise Doubts On U.S. Interest Rate Hike
Foreign exchange markets were on edge September 17th when it appeared the Federal Reserve may raise the overnight interest rate for the first time in more than nine years. This decision was pushed even further along, however, leaving market participants to question when the path to normalization would finally come to fruition. On the day it seemed that concerns were high with the Fed regarding the obvious slowdown in China as well as continued emerging and world market turmoil.
Job numbers disappointed on the October 2nd release and pointed to a potential slowdown in the US economy. Many reports as of late have signaled a slowing in hiring by U.S. employers over the past two months leaving many to question when, if even this year, a rate hike by the Fed would be appropriate
Non-Farm employment numbers were an abysmal miss in September coming out far below the 200,000 job forecast at 142,000. To further concerns, this figure was then revised down shortly thereafter to a disappointing 136,000 jobs. As a result of these poor numbers, Wall Street saw a significant selloff in U.S. stocks and securities as the dollar weakened and government bond yields tumbled. Employment is now on track to fall short of figures published last year which would mark the first time this has occurred since the economic collapse in 2008.
The Fed is now left to ponder the future path of American economic policy normalization. Many have now raised doubts on the rigidity that the U.S. economy can show in the face of a global economic slowdown. Markets are now pricing in just a 30% chance of a Fed rate hike before the end of 2015, which is a far cry from expectations just a short time ago.