Groundhog Day

What’s going on?

Data out on Friday showed that the US added just 194,000 new jobs last month, and it’s starting to feel like we’ve been here before…

What does this mean?

Economists had been hoping August’s disappointing jobs report was just a hiccup, but not quite: the US added just 194,000 jobs in September, the smallest monthly uptick of the year and well below economists’ estimated 500,000. And while the unemployment rate fell to 4.8% versus the 5.1% economists were expecting, it was partly because fewer people were going out for jobs in the first place. Still, at least there are a couple of straws the US government can clutch at: stay-at-home parents are more likely to start looking for work now that school is back in session, and the end of unemployment benefits should push more jobseekers into the market too.

Why should I care?

For markets: What will the Fed do now?

The report has put the US Federal Reserve in a tricky spot: the central bank was planning to wind down its bond-buying program as soon as next month, but it may have to put that plan on hold if it doesn’t want to risk damaging a clearly less-than-stellar recovery. Stock market investors will be pleased, mind you: less bond-buying would push yields up, making stocks comparatively less attractive and sending prices down.

The bigger picture: Lift the debt ceiling and raise da roof.

There was some good news for the US late last week: the government finally agreed to increase the amount of debt it could borrow to pay off its bills. Trouble is, the $480 billion increase only provides enough cash to last until the start of December, setting the scene for yet more uncertainty in less than two months’ time.

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Originally posted on October 8, 2021 – Groundhog Day