Paul Ashworth, chief US economist at Capital Economics, called the report a “mixed bag” because of stagnant paycheck growth. Wages grew at their slowest pace since July 2018, which could slow consumer spending.
In addition, the pace of hiring continues to slow, partly because the United States is very close to full employment.
“In a sane world, the Fed would be raising rates on this data, but alas, they are still likely to cut in October,” said Bryce Doty, senior portfolio manager at Sit Fixed Income Advisors.
“Not because of the state of the domestic economy,” Doty added, as weakness in manufacturing caused by trade worries can’t be fixed with monetary policy. But much rather because the rest of he world has been shaken by the trade war and is slowing down.
The Dow (INDU)
, S&P 500 (SPX)
and Nasdaq Composite (COMP)
were all trading higher. The Dow was up 190 points, or 0.7%, and the S&P 500 and Nasdaq Composite also climbed 0.7%.
Still, stocks were on track to finish the week in the red, with the Dow on pace to record their worst week since the start of August.
To be sure, America’s economy remains strong: A tight labor market has kept consumer spending robust. Consumers account for two-thirds of gross domestic product. But the manufacturing sector contracted in September, the second month in a row. The services sector grew at a weaker pace last month. And Friday’s jobs report wasn’t hugely encouraging.
As stocks slumped this week, safe-haven assets like bonds and gold moved higher, and has led to higher expectations for further interest rate cuts by the Federal Reserve.
Investors are still expecting an interest rate cut from the Federal Reserve later this month, even though the chances eased some after the jobs report came out. The likelihood is now at 79%, according to the CME FedWatch Tool.
The Fed’s recent rate-cutting has intermittently given stocks a boost in recent months. But investors haven’t ignored the slowing US economy, either. A series of disappointing reports about the US manufacturing and services sectors pushed the Dow lower by 800 points
over the course of Tuesday and Wednesday.