Stock markets hit new highs Tuesday as lackluster jobs report fuels expectations that Fed will continue $85bn-a-month stimulus
US stock markets hit new highs Tuesday as a lackluster jobs report fueled expectations that the Federal Reserve will continue its massive stimulus program.
The S&P 500 closed up 10 points at 1,754.67, a new record for the index. The Nasdaq closed up 9.52 points at 3,929, a 13-year high, and the Dow Jones closed up 75.46 points at 15,467, its highest level of the month.
Markets rose after the Department of Labor announced that the US added just 148,000 new jobs in September, a disappointing figure that appears to be attributable at least in part to employers cutting back on hiring before Washington’s budget battle.
The report – the release of which was delayed by the government shutdown – fell short of forecasts, but the unemployment rate dipped to 7.2%.
Economists surveyed by Dow Jones Newswires had expected a payroll gain of 180,000 jobs for the month – up from 169,000 jobs added in August – and for the unemployment rate to stay at 7.3%.
The Federal Reserve is currently pumping $85bn a month into the US economy through a bond-buying stimulus program. Janet Yellen, President Obama’s choice to be the next Fed chair, has made clear she would prefer not to cut back on the program until there are clearer signs of recovery in the job market.
Dan Greenhaus, chief strategist at broker BTIG, said the jobs report will probably delay any cuts in the stimulus – known as quantitative easing – well into 2014.
“The next two jobs reports will be ‘shutdown tainted’ as October will be directly impacted and any impact will reverse in November. That means December is the first normal jobs report and that isn’t released until early January,” Greenhaus said.
“Following that report is the next budget/debt ceiling debate and the Fed may choose to wait until that’s resolved. That means March is as likely as any other month for a reduction,” he wrote in a note to clients.
There was one bright spot in September’s report: in previous months, drops in the unemployment rate have been driven by people simply leaving the workforce, but September’s fall appears to have been driven by employment growth. The largest job gains were in construction, wholesale trade, and transportation and warehousing.
Employers added an average of 185,000 positions each month over the last year as of September, but gains have slowed in recent months. The number of long-term unemployed – those jobless for 27 weeks or more – has remained high and was little changed in September at 4.1 million. These individuals accounted for 36.9% of the unemployed.
The unemployment rates for teenagers (21.4%), African-Americans (12.9%) and Hispanics (9%) also remained high and unchanged.
The 16-day government shutdown began just days before the job report’s originally scheduled 4 October release date. The Bureau of Labor Statistics, which produces the monthly snapshot, had collected the data but was unable to finish its analysis until after the shutdown.
Earlier this month, ADP, a payroll company, said US businesses had added 166,000 new jobs in September and warned that the job recovery appeared to be “softening”. ADP also revised its jobs growth number for August down to 159,000 from 176,000.
Mark Zandi, chief economist of Moody’s Analytics, ADP’s partner on the report, said: “The job market appears to have softened in recent months. Fiscal austerity has begun to take a toll on job creation.”
The long-term impact – if there is to be any – of the government shutdown is unlikely to be fully reflected in September’s figures, although a recent report from Macroeconomic Advisers calculated that fiscal uncertainty since 2009 had slowed economic growth by a third of a percentage point per year, equivalent to a loss of 900,000 jobs.
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