Economy

Wall Street banks have slashed their expectations for third-quarter earnings of big US companies by $34bn over the past three months, with analysts now anticipating the most feeble rise in profits since the depths of the Covid crisis.Analysts are expecting companies listed on the S&P 500 index to post earnings-per-share growth of 2.6 per cent in the July to September quarter, compared with the same period a year earlier, according to FactSet data. That figure has fallen from 9.8 per cent at the start of July, and if accurate would mark the weakest quarter since the July to September period in 2020, when the economy was still reeling from coronavirus lockdowns.The darkening outlook highlights how worries over Federal Reserve rate increases and early signs of deterioration in the US economy have left investors more cautious on the prospects of listed companies. Wall Street’s S&P 500 has already fallen by about a fifth this year as fund managers adjust to this reality, but many analysts fear that current profit expectations are still overly optimistic. “There are some positives in the mix . . . [but] there’s little incentive for companies to paint a particularly optimistic outlook when the market is going to discount that anyway,” said Chris Shipley, chief investment strategist for North America at Northern Trust Asset Management.The Fed is in the midst of its most aggressive cycle of interest rate increases since the 1980s, and chair Jay Powell has made clear that it is willing to put up with causing economic pain to bring inflation down. The interest rate increases have sent borrowing costs for consumers and businesses soaring, weighed heavily on asset prices and are expected to reduce demand across the world’s biggest economy. “[Estimates] are still higher than what I would rationally expect,” said Omar Aguilar, chief executive at Schwab Asset Management. “They don’t necessarily have to come down dramatically, but I think there is a high probability that if the [Fed] is successful in its journey to destroy demand, then that will be reflected in earnings numbers in the first half of next year.”When earnings reporting season kicks off next week, investors will be watching closely for evidence of the impact inflation is having on costs and consumer demand, how hiring plans are changing and which companies did a better job of predicting appetite to avoid being left with warehouses full of unsold furniture or clothing. The recent strength of the dollar will add an additional pressure point for many companies, since around a third of S&P 500 revenues are earned overseas. If S&P 500 earnings meet expectations and rise 2.6 per cent, it would still represent a fall in inflation-adjusted terms, with annual US inflation running at more than 8 per cent. Even those results are flattered by the outperformance of a single sector — energy — which has benefited from surging commodity prices. Excluding energy, analysts forecast a 3.8 per cent decline. Still, estimates for next year have so far been far more resilient, with consensus pointing to growth of 6.5 per cent in the first quarter and 5.5 per cent in the second.There are some reasons to be optimistic. Retail spending data have been relatively resilient and a recent fall in petrol prices will provide an additional boost to consumers.Recent high profile warnings from companies such as FedEx have drawn outsized attention, but the total number of negative trading updates over the past three months was actually less than in the previous two quarters, while the number of positive updates was above the five-year average.Still, strategists at Morgan Stanley have argued that companies’ ability to predict demand has been damaged since the start of the coronavirus pandemic.From an equity market perspective, there is disagreement over whether stocks have fallen enough to reflect the uncertain environment. Morgan Stanley has been particularly bearish this year, arguing last month that “there is still a long way to go before reality is fairly priced”.However, Denise Chisholm, director of quantitative strategy at Fidelity, said that despite the fact “estimates for next year are not rational yet”, shares in some economically-sensitive sectors like consumer goods have already fallen so far that the worst of the news is priced in. “There is a common belief that if earnings are weak, only ‘defensive’ stocks will outperform, but sometimes economically sensitive sectors price it in much faster . . . by the time earnings declines are in, sometimes the stocks have already bottomed.” With average valuations of companies on the S&P 500 falling from 21 times expected earnings over the next year at the end of 2021 to 16, many investors and analysts said the next few weeks could provide an opportunity for businesses that are doing a better job of navigating the tough environment to differentiate themselves from underperforming rivals after an indiscriminate sell-off.The potential for sharp rallies during the bear market was highlighted this week as the S&P enjoyed its biggest two-day rise in more than two years, but few expect strong earnings will be enough to lift the wider market for a sustained period unless the Fed changes its approach. “A lot of securities are attractively priced,” said Charles Lemonides, chief investment officer at Valueworks, a New York-based hedge fund. “I think there will be differentiation between winners and losers . . . [but] when you look at the overall market, the Fed is still the be all and end all.” More

The unemployment rate among Hispanic workers dropped sharply in September, but declining labor force participation indicated fewer eligible adults found employment or searched for work.
The unemployment rate fell to 3.8% from 4.5% in August.
Labor force participation dipped to 66.1% from 66.8% in August.

A “Now Hiring” sign is displayed during a job fair for Hispanic professionals in Miami, Florida.
Marco Bello | Bloomberg | Getty Images

The unemployment rate among Hispanic workers dropped sharply in September, but that could be due to fewer eligible adults looking for a job.
Hispanic workers saw their unemployment rate fall to 3.8% from 4.5% in August. Broken down by gender, unemployment declined to 3.2% among Hispanic males over 20 years old and 3.6% among females.

The decline is much bigger than the one seen at the country level. The government said the overall jobless rate fell to 3.5% from 3.7% in August, its lowest level since July. A total of 263,000 jobs were created last month, less than a Dow Jones forecast of 275,000.

But Hispanics saw a sharp decline in labor force participation, which tracks how many people are employed or searching for work. It fell to 66.1% from 66.8% in August, indicating fewer individuals are finding employment or searching for work as the employment-to-population ratio tracking the proportion of the population employed dipped to 63.5%.
“That decline from 4.5% in August to 3.8%, while really significant, has to be tempered by the fact that clearly, Latinx workers withdrew from the workforce,” said Michelle Holder, a distinguished senior fellow at Washington Center for Equitable Growth. Many Hispanic workers do seek employment in some areas of the market heavily affected by Federal Reserve interest rate hikes, she added.

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While Hispanic workers saw the biggest declines on a month-to-month basis, she noted that Black women have still seen the sharpest decline in labor force participation since the start of the pandemic.
While the decline in participation is a reason for concern, areas of the labor market where Hispanic workers are overrepresented did experience significant gains in September, noted William Spriggs, chief economist of the AFL-CIO. Those sectors included leisure and hospitality and construction where payrolls were up 83,000 and 19,000, respectively.

But those numbers don’t come without their downsides, he said.
“This is disturbing because it means Hispanic workers are finding great difficulty moving out of their pockets and the big story of this recovery has been the success of women and Black workers to move out of the trap of just being in low-wage industries,” he said.

Fluctuations in the employment market tend to show up among Black and Hispanic workers first, Spriggs said, noting that unemployment among Black workers ticked down and labor force participation rose after two months of a concerning trend of rising unemployment and declining participation.
“The good news for Black workers is in many ways wiped out for Hispanic workers,” he said.
To be sure, Valerie Wilson, director of the Economic Policy Institute’s program on race, ethnicity and the economy, said individuals should hold off on drawing firm conclusions from one month of data.
Fluctuations are common in monthly reports and require several consecutive periods of a similar move before one can deduce a trend.
“It’s still hard to understand whether we’re just seeing volatility in the series because it’s a smaller sample size,” Wilson said.
— CNBC’s Gabriel Cortes contributed reporting.

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Good eveningGrowth in the US jobs market is slowing but an unexpected drop in the unemployment rate has fuelled expectations that the Federal Reserve will continue with its aggressive tightening of monetary policy.Non-farms payroll data showed the economy added a better than expected 263,000 jobs in September, but with the unemployment rate falling from 3.7 per cent to 3.5 per cent. The report sent stocks and government bond prices lower as investors banked on another 0.75 percentage point rise in interest rates from the Fed next month.

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Separate data yesterday showed higher than expected first-time jobless claims for the week ending October 1 while figures earlier in the week showed US employers cut more than 1mn vacancies in August, one of the biggest monthly drops in two decades of data analysed by the Financial Times, pushing the ratio of job vacancies to unemployed people from 2 to 1.7. Workers are however still quitting at a high rate, suggesting that labour supply and demand remain out of balance. New figures from the Job Openings and Labor Turnover Survey (Jolts) had also indicated the employment market could be slowing.Fed officials yesterday pushed back against speculation they might pause their monetary tightening campaign, stressing the need for more interest rate rises.They argue rises in unemployment will be limited as employers will be hesitant to shed workers in the face of widespread labour shortages. The labour force participation is still below its pre-pandemic level, at 62.3 per cent. “It’s too early to expect a pivot at the Fed level,” said one investor. “The bar is so high. We’d need a labour market that’s weaker, inflation coming down, some stress in the market or some sort of accident. We’re not there yet.”Read our new special report Investing in America with rankings on workforce and talent across 89 cities.Latest newsUS introduces tough new export controls on Chinese companiesUS moves to implement new EU data-sharing agreementZuckerberg’s metaverse rush pauses for ‘quality lockdown’For up-to-the-minute news updates, visit our live blogNeed to know: the economyIMF chief Kristalina Georgieva warned the global economy would feel like it was in recession next year from “shrinking real incomes and rising prices”. Her remarks suggest the fund will downgrade its economic forecasts again next week, for the fourth consecutive quarter.Latest for the UK and EuropeThe fallout from chancellor Kwasi Kwarteng’s “mini” Budget continues. The Bank of England said its £65bn gilt intervention staved off a financial “spiral” and one of its deputy governors said policymakers must “stay the course” on inflation. Former US Treasury secretary Larry Summers said “the destabilisation wrought by British errors will not be confined to Britain”. Undercover Economist Tim Harford offers five ideas that might actually boost UK growth.Economics reporter Valentina Romei delves into the data showing the serious effect of the cost of living crisis on British households, which, according to new think-tank analysis, will lose more than they gain from the government’s planned tax cuts. Winter power cuts could also be on the cards unless energy use is reduced.

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Norway and the EU agreed “joint tools” to help cut gas prices and stabilise energy markets. Belgium’s prime minister told the FT that without intervention, Europe was risking “massive deindustrialisation”. The German energy package is still dividing the bloc, with Poland arguing it could destroy the EU single market.Global latestThe US said “nothing was off the table” as it considered its response to the Opec+ cut in oil production. Learn why the announcement has sent out shockwaves across the world by reading our explainer.The Bank of England’s emergency intervention to support pension funds is just one example of growing jitters among international investors. US editor-at-large Gillian Tett outlines four flashpoints that could threaten financial stability.China’s strict zero-Covid policy has severely disrupted the tourist industry’s “golden week,” a seven-day holiday around the country’s National Day to celebrate the modern nation’s founding.In the first of three films based on her new book, global business columnist Rana Foroohar takes a trip across the US to see how neoliberal economic thinking has broken our food supply chains — and what can be done about it.

Video: Reinventing farming and food post-globalisation | FT Film

Need to know: businessThe UK started a new round of licences for North Sea oil and gas in an attempt to boost energy self-sufficiency, but is being challenged by environmental campaigners. Shell, Europe’s biggest oil and gas company, signalled an end to its record-breaking profit run after lower refining and chemicals margins and weaker gas trading in the third quarter.UK business leaders, faced with imposing record price rises to offset higher wage bills, called on the Tories to stop infighting and concentrate on the economy.Samsung, the world’s largest memory chipmaker and smartphone producer, was hit by its first profit fall in three years, highlighting the slowdown in demand for electronic devices. It follows gloomy updates from Micron and AMD in the US and Japan’s Kioxia. Why is Big Tech needlessly destroying millions of data storage devices when they could be wiped clean safely and securely and sold on the secondary market? Our Big Read investigates. In more positive tech news, west coast editor Richard Waters reports on a significant breakthrough in artificial intelligence. Generative systems — ones that automatically produce text and images from simple text prompts — have advanced to a level where they could have wide-ranging business uses.Science round upCovid-19 infections have risen in England and doubled in Northern Ireland, as the latest wave of the pandemic spreads. An estimated one in 50 people tested positive in England in the week to September 24, up from one in 65 in the previous week, while in Northern Ireland the figure rose from one in 80 to one in 40. The trend was less clear in Wales and Scotland.Molnupiravir, Merck’s Covid-19 antiviral pill, did not cut the risk of hospitalisation, according to a new study. Dr Andrew Hill from the University of Liverpool said: “We have seen this situation before with other Covid-19 drugs like remdesivir. Early results looked encouraging, but then larger trials showed no benefit.”Moderna has refused to reveal its mRNA vaccine technology to China because of commercial and safety concerns. The mRNA-based jabs provide better protection than those offered by Chinese pharma companies that have struggled with more infectious variants of coronavirus.The UK launched its Covid inquiry, enabling members of the public and specialists to give evidence on Britain’s response and preparedness for the pandemic. Three scientists won the Nobel Prize in Physics for their work on “entangled” particles, an idea Einstein once dismissed as “spooky action”.Get the latest worldwide picture with our vaccine trackerSome good news …A 230mn-year-old fossil unearthed a century ago in Scotland has enabled scientists to reproduce the skeleton of a Scleromochlus, a cousin of the pterosaurs. The study, published in Nature, suggests the first flying reptiles may have evolved from creatures similar to this tiny, bipedal runner.Artist’s impression of Scleromochlus taylori, a tiny reptile from the Triassic era © via REUTERS More

The writer is author of ‘Chip War’, visiting fellow at the American Enterprise Institute and a professor at the Fletcher SchoolWhen Taiwanese manufacturing tycoon Terry Gou and former US President Donald Trump grabbed ceremonial shovels at the 2018 groundbreaking of a new electronics factory in Wisconsin, many tech analysts and executives saw a textbook example of why politicians should not meddle in supply chains. Wisconsin voters soon learned that Gou’s company Foxconn only invested because it was promised multibillion-dollar subsidies and loosened environmental rules. When Foxconn’s factory plans were dramatically scaled back several years later, it seemed like evidence that political bluster could not overpower market forces.Five years on, however, intensified US-China tension over technology — and especially semiconductors — has shifted electronics supply chains in slow but significant ways. Foxconn’s Wisconsin facility is far smaller than initially promised, but TSMC, Taiwan’s most valuable company and the world’s biggest producer of processor chips, will soon open a new facility in Arizona. Previously, almost all of TSMC’s recent investment was in Taiwan or China. Now it is diversifying its fabrication footprint, building a new chip fab in Japan and exploring one in Singapore, too. TSMC’s change in tack is driven by subsidies from these governments as well as political pressure to reduce the concentration of chipmaking along the Taiwan Strait.In corporate boardrooms as well as defence ministries, concern is growing that mutually assured economic destruction may not keep the peace in the Taiwan Strait. Multinational businesses have invested many billions of dollars in both Taiwan and China on the assumption that war is simply too costly. Yet just this year, Germany’s bet on the same thesis for securing its energy supply has gone horribly wrong. Xi Jinping may seem more likely than Vladimir Putin to be dissuaded by the cost of war. However, as its economically disastrous Covid lockdowns have shown, China’s leaders are no longer so fixated on economic growth.Even corporate leaders who see the risk of war as remote can’t ignore more immediate policy changes driven by the US-China chip war. The US continues to tighten its chip choke, rolling out new restrictions limiting China’s access to chipmaking software and equipment. Some foreign chip companies with facilities in China are paying the price for failing to anticipate these new restrictions. SK Hynix, one of South Korea’s two major memory chip producers, is now restricted from upgrading critical lithography equipment in its plant in Wuxi, China, which will prevent it from producing next generation chips there. Partly because of this, non-Chinese firms are changing their investment patterns. Subsidies are also changing the industry’s structure. Attention has focused on recently passed US legislation to incentivise semiconductor manufacturing, leading TSMC and South Korea’s Samsung to build new facilities in Arizona and Texas respectively. Europe, Japan and India are rolling out their own semiconductor subsidies, too. As the location of semiconductor fabrication shifts, the production of chipmaking materials and supplies will, too. The biggest semiconductor subsidy programme, however, is China’s, where the national government, as well as provincial and local authorities, continue to pour funds into the chip industry. A wave of new facilities producing low-end processor chips is about to come online, which will depress prices in this segment and spark dumping allegations and trade disputes. More immediately, China’s government subsidies for Yangtze Memory Technologies Corporation, a producer of Nand memory chips, appear to be bearing fruit. Apple is considering using YMTC’s chips in new iPhones. Previously this type of chips was purchased from South Korean, Japanese or American companies.China’s subsidies and America’s chip choke are forcing change downstream, too. Apple, whose finely tuned supply chains shape how the entire industry sources components, is increasing device assembly in Vietnam and India. The biggest signal is that Apple may use different components for phones intended for Chinese customers than those sold abroad. Apple has told US legislators that it will only use YMTC’s memory chips in phones it sells within China. Operating separate “China” and “non-China” supply chains is the definition of decoupling. More

The US has introduced sweeping export controls that will severely complicate efforts by Chinese companies to develop cutting-edge technologies with military applications, in one of the toughest actions President Joe Biden has taken against China.The commerce department on Friday announced restrictions that will make it extremely hard for Chinese companies to obtain or manufacture advanced computer chips and will slow their progress in artificial intelligence.The measures are also designed to make it much tougher for China to develop supercomputers with military applications that range from modelling nuclear weapons to developing hypersonic weapons.The controls mark a new attempt to decouple China from the US in cutting-edge technologies. They come days before the Chinese Communist party holds its 20th national congress at which President Xi Jinping is expected to seal a third term as leader.Paul Triolo, a China and tech expert at Albright Stonebridge, a consultancy, said the action was a “major watershed” in US-China relations and in the increasingly intense technology competition between the two countries.“The US has essentially declared war on China’s ability to advance the country’s use of high-performance computing for economic and security gains,” said Triolo.The controls will hit Chinese companies in multiple ways. They will bar US companies from exporting critical chip manufacturing tools to China, which will affect groups such as Semiconductor Manufacturing International Corp, Yangtze Memory Technologies Co and ChangXin Memory.The restrictions will also prohibit “US persons” — American citizens and companies — from providing direct or indirect support to Chinese companies involved in advanced chip manufacturing.Kevin Wolf, an expert on export controls at Akin Gump, said the US persons provision was the “most significant and expansive” element of the broad package of measures announced. He said it was a “novel” approach because it threatened a form of sanctions even if the underlying technology was not subject to existing export controls.The US also put YMTC — along with 30 other Chinese entities — on a list of “unverified” companies, paving the way for possible inclusion on a separate blacklist called the “entity list” that would effectively bar US companies from supplying them with technology.“The administration’s strategy is to deny China the capability to indigenise its semiconductor industry. If the US is successful, this causes a huge problem for Beijing’s strategy to be a world-class player,” said Martijn Rasser, a security and technology expert at the Center for a New American Security, a think-tank.Underscoring the scope of the controls, the US is using a far-reaching mechanism called the “foreign direct product rule” to make it harder for China to develop and maintain supercomputers and AI technology.The rule — which was first used by the administration of Donald Trump against Chinese technology group Huawei — in effect bars any US or non-US company from supplying targeted Chinese entities with hardware or software whose supply chain contains American technology.But in an effort to reduce supply chain disruptions, the administration will carve out an exception for chipmaking facilities in China owned by companies from the US or allied countries that are exporting chips.“The PRC [People’s Republic of China] has poured resources into developing supercomputing capabilities and seeks to become a world leader in artificial intelligence by 2030. It is using these capabilities to monitor, track and surveil their own citizens, and fuel its military modernisation,” said Thea Kendler, a senior commerce department official. “Our actions will protect US national security.”Analysts said China’s memory chipmakers, including YMTC and ChangXin Memory, would feel the most immediate blow.“They are basically doomed,” said Mark Li, a semiconductor analyst at Bernstein in Hong Kong. “It will be very difficult for them to get the equipment they need.But the ban on the export of semiconductor tools could significantly hurt Chinese chipmakers more broadly because US equipment makers have a stranglehold in a few crucial niches.Triolo said there would be “many losers”, including US chip design leaders such as Nvidia and AMD, and tool makers including Applied Materials and Lam Research. He said the rules would also hit non-US players, including ASML, the Dutch company that produces the most advanced semiconductor tools, and TSMC, the Taiwanese contract foundry company.

One chip industry executive said the US was attacking China “from all angles”.“The stunning thing about this move is that they have assembled a whole array of tools,” the executive said. “They are not just targeting military applications, they are trying to block the development of China’s technology power by any means.”The Semiconductor Industry Association, the main US lobby group for the chip industry, said it was “assessing” the effect of the controls and working with its members to ensure compliance.“We understand the goal of ensuring national security and urge the US government to implement the rules in a targeted way — and in collaboration with international partners — to help level the playing field and mitigate unintended harm to US innovation,” the group said.Chuck Schumer, the Senate Democratic majority leader, welcomed the controls but said the US need to go further. He said the Senate was looking at ways to include measures in an upcoming defence spending bill to counter Chinese efforts to undermine the US chip industry.Follow Demetri Sevastopulo on Twitter More

Say crash and people tend to think of The Great Depression and the Global Financial Crisis: severe economic contractions triggered by financial crises that caused enduring slumps. But a paper out this week from the Bank for International Settlements suggests, rather worryingly, that oil price shocks tend to have the greater scarring effects on long-term growth.BIS lays out its methodology as follows, drawing on data from 24 countries from 1970 to 2019 from which they glean 4,908 “observations” (for a more detailed breakdown, read the paper):We first define contractions as time periods where the (standardised) annual real GDP growth rate is below the median, and order such events in terms of their severity. We then calculate multiyear real GDP growth rates (up to 10 years) and compare those from the origin of contractions — the quarter immediately preceding the drop in GDP — with those calculated from all other points in the sample.First, authors David Aikman, Mathias Drehmann, Mikael Juselius and Xiaochuan Xing find a “tipping point in recovery dynamics” at around the 20th percentile: ie, only the top-fifth most severe contractions have observable effects on GDP levels a decade later. Economic contractions are grouped into four categories — those caused by banking crises, restrictive monetary policy designed to combat high inflation, oil shocks, and everything else. Of the “extreme contractions” contained in the dataset (at or below the fifth percentile), 100 are banking-crisis driven, 51 are associated with monetary policy, 19 are caused by oil shocks and 9 have “other” causes.

“The solid lines show points estimates of this difference for contractions in the percentile buckets indicated on the x-axis. The shaded areas are 95% confidence intervals. The y-axis is in standard deviations of 10-year real GDP growth” © BIS research

The researchers summarise these findings as follows:The difference in 10-year growth rates is 0.9 standard deviations following the 5% largest annual falls in GDP, but a more modest 0.2 standard deviations for a contractions between the 15th and 20th percentiles. These reductions in the 10-year growth rates translate approximately into permanent losses in the level of real GDP of 4.75% and 1.05%, respectively, for a typical economy in our sample. This is below the average loss estimate of 8.4% reported by Ball (2014) for the Great Recession.The team next sort crises by type, focusing on the the most severe contractions at or below the fifth percentile:

Recession types are labelled on the x-axis. The y-axis is in standard deviations of 10-year real GDP growth © BIS research

Perhaps counter-intuitively, BIS finds that . … . . while the point estimates of the growth shortfall following monetary policy tightenings is somewhat smaller than that following financial crises, oil price shocks generate materially larger growth shortfalls with 10-year growth rates 1.5 standard deviations weaker following such shocks . . . Overall, these findings challenge the notion that it is only financial crises that generate scarring effects; the perhaps surprising message from [the chart above] is that all severe contractions have this characteristic.Imagine the hit to growth were an oil shock and a financial crisis to hit not too far apart . . .  More

Leisure and hospitality was the standout sector, growing by 83,000 jobs.
Health care has now returned to its pre-pandemic employment levels, according to the labor department, and hospitals and ambulatory services each added 28,000 jobs in September.

Job growth remained strong overall in September, but declines in several sectors led to a slowdown compared to hot readings during the summer.
Leisure and hospitality was the standout sector, growing by 83,000 jobs. The sector has been consistently adding jobs since the Covid restrictions in 2020 shuttered many bars and restaurants. However, the sector is still more than 1 million jobs below its pre-pandemic levels, according to the Labor Department.

“It is a positive sign to see a sector that has been hit so hard continue its bounce-back with really strong gains here. It is moving closer to its pre-pandemic level, but it’s still 6.7% below where it was back in February 2020. It’s going to take a long time at its current pace to get back there,” said Nick Bunker, economic research director for North America at the Indeed Hiring Lab.
“That’s very clearly a part of the economy that can add more workers, but I think we are at a point now where we can say that leisure and hospitality’s share of employment in the U.S. labor market is probably going to be lower than it was before the pandemic,” he added.
Health care and social assistance also had a strong month, adding more than 75,000 jobs. Health care has now returned to its pre-pandemic employment levels, according to the labor department, and hospitals and ambulatory services each added 28,000 jobs in September.
The Labor Department includes those sectors in a broader sector, which includes private education, and that larger group added 90,000 jobs for the month.
But there were several areas that shed jobs last month, contributing to the slowdown in job gains. Government was the biggest laggard, dropping 25,000 jobs. Retail trade and transportation and warehousing combined to shed 9,000 jobs, reflecting a weakness in consumer spending on goods.

Bunker said the slowdown in retail appeared to be a matter of hiring slowing, as opposed to widespread layoffs, and that the government number could have been impacted by seasonal adjustments.
Strength in the construction and manufacturing areas, which added 19,000 and 22,000 jobs respectively, could cool some fears of an imminent recession in the U.S. Those areas have continued to add jobs even as the housing market and industrial survey data has suggested those sectors are seeing a slowdown in growth.

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Employment in the goods producing sector fell by a net 24,800 jobs, largely in manufacturing. The services sector was up by a net 45,900 positions, mostly in educational services and health care and social assistance.Market reaction: CAD/STORY:Link:https://www150.statcan.gc.ca/n1/daily-quotidien/221007/dq221007a-eng.htmCOMMENTARYNATHAN JANZEN, SENIOR ECONOMIST, ROYAL BANK OF CANADA”We had a small increase in employment and also a small decline in the unemployment rate. But also as expected, a lot of that had to do with volatility. In the education services sector, there was a huge drop in August in that sector that was reversed in September. So kind of looking through that volatility, the job count is still down 92,000 over the last four months. The unemployment rate at 5.2% is still higher than its record low record low 4.9% in June and July. So I think on balance, there are signs that labor markets are still strong, but softening.””The unemployment rate is still low. It was unsustainably low earlier in the summer. So it does probably need to rise in order to put a cap on inflation… So at this point I wouldn’t think the increases we’ve seen to date and in the unemployment rate would worry the Bank of Canada. They’d be still pretty focused on inflation… You would have really needed a big downside surprise in labor markets to kind of really derail them from more aggressive interest rate hikes, and when we didn’t get that.” SIMON HARVEY, FX MARKET ANALYST, MONEX EUROPE AND MONEX CANADA”With today’s labour force survey neither rebuking (Bank of Canada Governor Tiff) Macklem’s hawkish stance on policy nor wholeheartedly endorsing it, the reaction in USD-CAD today was primarily driven by the outcome of the U.S. nonfarm payrolls data, which put the debate of the Fed pivot to bed for the time being.””The divergence of the data confirms the widening in front-end yield differentials, which we expect to remain in place over the remainder of the year and to drag USD-CAD up towards the 1.40 handle.” DOUG PORTER, CHIEF ECONOMIST, BMO CAPITAL MARKETS “This report was fairly close to consensus; no huge surprises here. When you dig beneath the surface … I would say on balance it is probably a little less impressive than the headline moves would suggest just because most of the jobs gains were in part-time. There was a fair bit of weakness in the goods producing sector, especially in manufacturing. And of course the unemployment rate largely fell because of a further modest pullback in the participation rate.Having said all that it is a bit of a relief to see a plus sign in front of the jobs number for once. In some ways, this is an ideal report from a policy stance. You have got modest gains with very slight moderation in wages. It’s cool but not too cool.”ANDREW KELVIN, CHIEF CANADA STRATEGIST, TD SECURITIESThe jobs data is “a little softer than we’d expected even though it is right in line with the market consensus. Given the declines of the previous three months, this is a pretty tepid rebound. The unemployment rate falling, it looks like a good thing at face value, but a lot of that does reflect a lower participation rate. The most interesting piece of this is the fact that wage growth did decelerate a little bit for permanent employees, down from 5.6% year-over-year to 5.2% year-over-year. That was not expected.””I think people had been looking for wages to be roughly stable. The Bank of Canada will be pleased to see that. It’s not going to be the sort of change in the evolution of the data that changes the Bank of Canada’s trajectory, but it does reduce one angle of worry. It speaks to the deceleration in the economy.””The bank would have been very concerned to see wage growth accelerate. They would prefer to see wage growth decelerate here. Now, wages are still running quite hot in objective terms… But the direction of travel here is the direction of travel the Bank of Canada wants to see.” More