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US unemployment rate rises, fuelling speculation Fed will end rate hikes

The unemployment rate in the US increased while wage growth slowed last month, in a sign that the US labour market may be cooling. Stocks were trading higher early Monday on hopes the Federal Reserve could pause its interest rate hiking cycle this month and due to efforts by China to support its property market.

Shane Strowmatt, LGT
Reading time
5 minutes
Jobs sign
© Schutterstock

In Asia, the major stock market indices were trading in positive territory Monday morning after Chinese authorities announced a series of measures aimed at propping up the real estate sector late last week, such as relaxed borrowing conditions and tax deductions. The Hang Seng Index was leading gains, up 2.5%, with real estate stocks advancing strongly. In mainland China, the Shanghai Composite jumped more than 1%. In Tokyo, the Nikkei 225 was up 0.5% and in South Korea, the Kospi gained 0.4%. In Australia, the S&P/ASX 200 was up 0.5%.

Data released at the end of last week showed the unemployment rate in the US rose to 3.8% in August while wage growth slowed. The report from the US Bureau of Labor Statistics wasn’t all gloomy for the US labour market, however, as nonfarm payrolls increased by 187,000 in August when compared to the previous month. The altogether mild data was interpreted by market participants as weakness in the US labour market, which has remained quite robust this year despite a worsening economic outlook for the world’s largest economy. Friday’s jobs data was the last report before the Fed makes its next monetary policy announcement on September 20.

Also out of the US late on Friday was data that showed manufacturing activity may be stabilizing, albeit at a very low level. The Institute for Supply Management’s Manufacturing (ISM) Purchasing Managers’ Index (PMI) increased to 47.6 in August from 46.4 in July. A level below 50 signals contraction.

In New York, stock indices didn’t move much in either direction despite the labour market report and PMI data, which were already largely priced in. The Dow Jones Industrial ended Friday’s session up 0.3% at 34,837.71 points and the S&P 500 gained 0.2% to finish the week at 4,515.77 points. The Nasdaq 100 slipped marginally to close at 15,490.86 points. US stock markets are closed on Monday for the Labor Day holiday.

Also last week, the Swiss Consumer Price Index (CPI) increased by 0.2% in August when compared with the previous month. When compared with the same month a year earlier, inflation was 1.6%. That figure is below the Swiss National Bank’s (SNB) target of 2% and much lower than in neighbouring EU countries. It is the third month in a row below the SNB’s target but the 1.6% figure was the same as during July, meaning inflation has stopped decelerating after slowing steadily for several months. The Swiss National Bank will take the inflation data into consideration when making their next policy decision on September 21.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German trade balance (09:00 am CET), Swiss gross domestic product (10:00 am), Sentix investor confidence for the eurozone (11:30 am).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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