U.S. economy adds 142,000 jobs, but mining continues to see losses

Jobs data from the Bureau of Labor Statistics came in weaker than expected for September today, sending the U.S. 10-year bond and oil prices down. The economy created an extra 142,000 jobs in September, short of the 203,000 forecast, and August numbers were revised down to just 136,000, according to a release from the BLS. Unemployment remained unchanged at 5.1%.

Employment in the mining sector continued to decline in September, shedding 10,000 jobs, with losses concentrated in support activities, which accounted for 70% of the jobs lost. Mining employment reached a peak in December, 2014, but has since declined by 102,000 jobs.

Employment in professional and business services continued to trend up in September (+31,000). Job growth has averaged 45,000 per month thus far in 2015, compared with an average monthly gain of 59,000 in 2014. In September, job gains occurred in computer systems design and related services (+7,000) and in legal services (+5,000). Employment in construction, manufacturing, wholesale trade, transportation and warehousing, financial activities and government showed little change according to the BLS.

Soft job data hits oil and bonds

Oil prices fell about 1% Friday following the news that fewer jobs were created than forecasts had originally anticipated, which weighed on the energy demand outlook. The drop in the dollar did limit losses, however.

The BLS release today indicated that the U.S. economy may not be growing at the pace previously thought. The data “took a [Federal] rate hike off the table for this year and heightens fear of a global slowdown,” said Chris Jarvis, energy analyst at Caprock Risk Management.

The labor market has been a bright spot in the U.S. economy and the main argument supporting the Federal Reserve’s plan to raise the Fed key interest rates from near zero for the first time in nine years. Many investors were skeptical whether the Fed could tighten before the end of the year, and today’s job data seems to have pushed a rate-hike out into 2016, based on information from The Wall Street Journal.

Fed-funds futures, used by investors and traders to place bets on central-bank policy, showed a 2% likelihood of a rate increase for the Fed’s October 27-28 policy meeting, compared with 14% before the jobs report. The odds were 29% for the December 15-16 meeting, compared with 44% before the BLS data was released.

The yield on 10-year Treasury notes was down to 1.928%, compared with 2.05% before the data was released, and 2.042% Thursday. Yeild on the two-year note, which is highly sensitive to changes in the Fed’s interest-rate policy, was 0.562%, compared with 0.669% before the report and 0.649% Thursday.

“The entire market is shocked,’’ said Daniel Mulholland, senior U.S. Treasury trader at Crédit Agricole. “The report is weak across the board. I don’t think the Fed is going to raise rates in this environment. A rate hike is a 2016 story.”

Waiting to raise rates comes with its own problems though, Art Hogan director of equity research and Chief market strategist for Wunderlich Securities, told Oil & Gas 360. “The concern now is, if we have another quarter like the first quarter of 2015, there’s nothing to give back if we don’t raise rates.” As the presidential election season approaches, it will become increasingly difficult for the Fed to make a change to rates, Hogan added.

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