Strong September jobs an outlier as labor demand worries persist: Citi

Source Investing

Investing.com -- The strong September jobs report caught many by surprise, putting the brakes on bets for another jumbo Federal Reserve rate cut, but Citi believes this strength was an outlier as labor demand remains a worry.

"[D]etails of September data leave us skeptical that this will be the case," Citi analysts said in a Monday note, expecting a "reversion to weaker dynamics at some point in the next few months."

The September report showed 254,000 payroll jobs added and the unemployment rate dipping to 4.05%, but it may not reflect a resilient labor market, the analysts said. 

The strength could be more a result of low labor market churn, influenced by seasonal adjustments rather than genuine demand for workers that could likely course correct in the months ahead.

On the supply side, the strong household survey was largely driven by an unusually large increase in government employment, which the analysts don't expect to see repeated.

Without this surge, the unemployment rate could have risen to 4.3%, highlighting potential fragility in the labor market, analysts suggest. 

The 78,000 job gains seen in the leisure and hospitality sector, which accounted for  for a nearly  a third of the total new positions, comes at a time when hiring rates in the sector have been cooling to levels seen during April 2020, flagging concerns about sustainability," the analysts said.

If, however, the incoming labor market data continue to reflect the strength of the September report, then that would confirm that the unemployment rate has stabilized at a low level, pointing to a soft landing for the economy, 

But Citi believes this is unlikely as its view of a weakening labor market "has been based on trends seen across many different datasets" suggesting "the very-strong September jobs report looks like the outlier."

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Fed Decision Eve: 104 Economists Expect No Change; Why Is Citadel Securities Betting on a Surprise Hike?The Federal Reserve will announce its July interest rate decision on July 29, Eastern Time. The current target range for the federal funds rate remains at 3.5%-3.75%, but the suspense sur
Author  TradingKey
7 hours ago
The Federal Reserve will announce its July interest rate decision on July 29, Eastern Time. The current target range for the federal funds rate remains at 3.5%-3.75%, but the suspense sur
placeholder
WTI Oil flirts with the $80 level amid speculation about US-Iran peace talksOil prices remain depressed on Tuesday, as hopes of a new round of peace talks between the US and Iran boosted hopes of a de-escalation of the Middle East conflict.
Author  FXStreet
8 hours ago
Oil prices remain depressed on Tuesday, as hopes of a new round of peace talks between the US and Iran boosted hopes of a de-escalation of the Middle East conflict.
placeholder
Gold declines despite easing concerns over inflation, interest rate hikesGold price (XAU/USD) loses ground after registering gains in the previous day, trading around $4,050 per troy ounce during the Asian hours on Tuesday.
Author  FXStreet
16 hours ago
Gold price (XAU/USD) loses ground after registering gains in the previous day, trading around $4,050 per troy ounce during the Asian hours on Tuesday.
placeholder
Gold Price Forecast: Gold Poised to Break $4,200 as Oil Price Slump Eases Inflation FearsAs of the Asian session on July 27, gold prices ( XAUUSD) opened with a strong gap up today and maintained its upward momentum intraday, briefly breaking through $4,100 during the session
Author  TradingKey
Yesterday 08: 51
As of the Asian session on July 27, gold prices ( XAUUSD) opened with a strong gap up today and maintained its upward momentum intraday, briefly breaking through $4,100 during the session
placeholder
Middle East War updates: US-Iran pause strikes as Trump weighs up diplomatic optionsHere’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.
Author  FXStreet
Yesterday 01: 32
Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.
goTop
quote