Payrolls push on
You can see and hear the angst from investors in the US, as the employment date refuses to roll over in earnest, meaning another 75 basis points interest rate hike lies ahead.
The payrolls report last night will almost certainly see the Federal Funds rate taken up to 3.75 to 4.00 per cent at the next meeting.
Nonfarm payrolls recorded another increase of +263,000 in September, and revisions to earlier months added a further +11,000.
The participation rate remains below pre-pandemic highs, and was little changed at 62.3 per cent this month.
261,000 left the labour force last month, reversing a gain from the previous month.
In turn, the unemployment rate ticked back down to 3.5 per cent in September, from 3.7 per cent in August.
Earnings growth was slightly stronger, up to +0.28 per cent to +0.31 per cent from the previous month (but well below recent July highs of +0.50 per cent), and average hourly earnings growth over the year slowed slightly from 5.2 per cent to 5 per cent.
That's the slowest annual growth in average hourly earnings since December 2021.
You can straight away see the difference from Australia, where wage price growth remains mired at well under 3 per cent on the latest measures.
Wen pivot?
There are various indicators you can choose to look at when it comes to hiring momentum, and they variously appear to suggest that a significant slowdown in hiring could still be 4 months or so away, which yet could mean even more pain ahead from a tightening perspective.
Inflation to fall...eventually
The brighter news is that it's increasingly obvious that inflation is going to fall eventually in the US.
For example, one of the first places inflation showed up via the stimulus cheques was in used car prices, but these are now lower over the year (having been up by more than 54 per cent year-on-year at one stage!).
Container prices fell another -5 per cent overnight, to be -30 per cent lower this week alone.
Just to put some numbers on that: last Friday container rates were at $2,942, and this Friday they were $2,145, representing a pure freefall.
A big part of the inflation problem in the US (less so in Australia) has been rents.
In real time, most private sector measures are now pointing to declines, including Zillow.
5-year inflation expectations have dropped from alarmingly high levels back down to 2.3 per cent.
The wrap
Overall, it's clear that inflation is going to drop away in time, but in the meantime the Fed is going to keep it's foot on the throat of investors with a further pain-inducing rate hike of 75 basis points at the next meeting.
It remains to be seen if this results in something or some major institution "blowing up".
Stock markets dropped sharply on the news and are now back close to their 52-week lows.
Aussie stocks tend to follow the US lead, so will likely also be in the red in the early part of next week, after being up around 5 per cent last week.
---
I was chatting to an unnamed economist in a wine bar in Melbourne last night, and the view seems to be that while the US has experienced a strong demand-led problem, in Australia our challenges have been far more so supply-related.
Gareth Aird of CBA articulated on ABC News Australia last night why their 'house view' is for one more interest rate hike in Australia of 25 basis points...and then we're done.
Just an aside on the Aussie dollar, some real estate agents have told me that more Aussies are looking to take breaks at home now, with the A$ buying 63.7 US cents, a far cry from the glory glory years when se sat at above parity with the US dollar.
Expecting that this will encourage a bit more tourism within Australia, and add further to accommodation pressures.
