Wall Street resumed a sell-off on Friday after disappointing figures from the US jobs market suggested that the world’s biggest economy is running out of steam.
Adding to concerns rattling stock markets over Donald Trump’s trade dispute with China, the US labor department said that the US economy added 155,000 new jobs in November, well below last month’s figures and economists’ forecasts.
The Dow Jones shed almost 400 points in morning trading in New York, as the figures prompted concern among investors that a period of slower economic growth could lie ahead.
Although the FTSE 100 closed up 74 points in London at 6,778, it had been more than 70 points higher still earlier in the day before giving up some of the gains. The leading index of UK shares had dropped by more than 200 points on Thursday in the biggest daily decline since the Brexit vote.
Philip Shaw, chief economist at banking group Investec, said: “It demonstrates the skittishness of financial markets at the moment. Sentiment can shift around very quickly and there was already a negative vibe.”
November was the 98th consecutive month of growth in hiring in the US, the longest streak of jobs growth since records began. But the pace of hiring slowed dramatically last month. The US added 250,000 jobs in October and economists had expected 198,000 new jobs to be added this month.
The unemployment rate remained at 3.7%, a low unseen since 1969, and the US is still adding around 200,000 jobs a month. But some market watchers believe the recovery is running out of steam.
The news came after ADP, the US’s largest payroll supplier, said that jobs growth had probably peaked. According to ADP the private sector added 179,000 jobs in October, well below the 225,000 added in September and lower than economists had forecast.
“Job growth is strong, but has likely peaked,” said Mark Zandi, chief economist at Moody’s Analytics, which produces the figures with ADP. “This month’s report is free of significant weather effects and suggests slowing underlying job creation. With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.”
Economists said that a weak jobs report could discourage the Federal Reserve from raising interest rates much further next year, after having consistently shifted the cost of borrowing higher in recent years. The central bank is however still expected to hike interest rates on 19 December for the fourth time this year.
Investec’s Shaw said: “You could argue the soft jobs number could be good for Wall Street on interest rate grounds, but in this mood, you could also try and say that a weak number would cause a slackening of the yield curve [lower borrowing costs on long-dated US government bonds] which will get stocks concerned.”