Time to wrap up, after a lively week.

American employers added 254,000 jobs last month in the penultimate jobs report before the US election, defying fears of a slowdown in the labor market.

Job creation unexpectedly accelerated in September, while the headline unemployment rate slipped to 4.1% from 4.2% in August.

Economists had forecast a non-farm payrolls reading of around 132,500 for September, after a cooler summer of employment growth.

Hiring instead rose sharply from recent months. In August employers added 159,000 jobs, and in July, they added 144,000.

Both estimates for July and August were revised higher by the Bureau of Labor Statistics on Friday – adding 72,000 more jobs than previously reported – highlighting the strength of the labor market.

The strong jobs report lifted shares on Wall Street, and sent the dollar flying to a seven week high, dragging down the pound.

Sterling is now firmly on track for its worst week since February 2023, having dropped by around 2% or two and a half-cents this week.

It had rallied, before the jobs report, after the Bank of England’s chief economist warned against cutting interest rates “too far or too fast”.

Huw Pill said there should be a gradual reduction in interest rates to make sure inflation remains near the Bank’s 2% target, a day after the governor, Andrew Bailey, said the central bank could move “more aggressively” to lower borrowing costs.

In a boost for the UK’s Labour government, the UK construction sector grew at its fastest pace in two-and-a-half years in September, as housebuilding strengthened.

Here’s the rest of today’s business news:

President Joe Biden has welcomed today’s jobs report, saying:

Today, we received good news for American workers and families with more than 250,000 new jobs in September and unemployment back down at 4.1%. With today’s report, we’ve created 16 million jobs, unemployment remains low, and wages are growing faster than prices.

Under my Administration, unemployment has been the lowest in 50 years, a record 19 million new businesses have been created, and inflation and interest rates are falling.

And we’re seeing the power of collective bargaining to lift up workers’ wages—including the progress made by dockworkers on record wages with carriers, and port operators and the reopening of East Coast and Gulf ports.
Make no mistake: We have more to do to lower costs and expand opportunity. Congress should pass our plan to build millions of new homes, expand prescription drug price caps, empower workers and protect the right to organize, and cut taxes for hardworking families.

Congressional Republicans have a different plan—more giant tax cuts for billionaires and big corporations, ending the Affordable Care Act, undermining workers by cutting overtime and making it harder to organize, and imposing a national sales tax that would raise costs by nearly $4,000 per year. While they put billionaires first, we’ll keep fighting to grow the middle class.

Stocks have jumped on Wall Street at the start of trading, as investors hail today’s stronger-than-expected US jobs report.

The Dow Jones industrial average gained 233 points at the open, up 0.55% to 42,244 points.

The broader S&P 500 index gained 0.75%, while the tech-focused Nasdaq is up 1.2%.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, says hopes are rising for a “goldilocks scenario” for the US economy, explaining:

“The US jobs market appears to have been infused with confidence in September, with new hirings shooting past expectations and the unemployment rate edging down. Fed policymakers had been worried about the potential for the jobs market to rapidly cool off, which is why they opted for a super-size rate cut last month. These latest numbers will help assuage those worries and add to a picture of a resilient US economy, which appears to be heading for a soft landing.

Financial markets are pricing in the chances of a cut in November at 93%, but are putting bets on a more usual 0.25% reduction. As expectations have retreated for a bigger rate cut, it’s helped push the dollar to a seven-week high, and Wall Street looks set to end the week on an upbeat note.

Neil Birrell, chief investment officer at Premier Miton Investors, says:

“That was quite some jump in US payrolls in September, almost off the scale relative to expectations, and earnings were up more than anticipated as well. This is without question a strong jobs report.

“US employment data has been the focal point for bond and equity markets for the last two months and that will continue to be the case as everyone tries to second guess Fed policy. As it stands, a 0.5% cut must now be off the cards at their next meeting, although we do have one more jobs report before then – guess what we’ll all be looking at!”

Richard Flynn, managing director at Charles Schwab UK, agrees that the jobs report is stronger than expected:

“Today’s jobs figures have exceeded expectations, indicating a high level of demand in the labour market, reversing a recent trend. At the last Fed meeting, Jerome Powell emphasised that the slowdown in job growth was the key factor behind the decision to kick off the easing cycle with a larger-than-normal rate cut. Powell indicated that the “balance of risks” to the US economy has shifted—implying that supporting the job market has taken precedence over fighting inflation.

Today’s jobs figures suggest the Fed’s action is working well to support its full-employment mandate. With high inflation largely in the rearview mirror, this could be less good news for markets, as it may slow the pace of future rate cuts.”

Seema Shah, chief global strategist at Principal Asset Management, says such a strong jobs report means the Fed can’t consider another large cut to interest rates at its next meeting:

“Did the Fed even need to cut rates in September, let alone cut by 50bps?

The monster upside surprise suggests that the labor market may actually be a picture of strength, not weakness, and it completely dismisses the idea that the Fed could even contemplate another 50bps cut in November.

As jobless claims, the Challenger survey, and the multitude of strong economic data have been suggesting, the U.S economy is still robust. And with Fed easing now underway, recession risk has collapsed. Markets will need to keep a closer eye on inflation as, now, there are policy risks on both sides of the economy.”

The BLS reports that:

• Employment in food services and drinking places rose by 69,000 in September.

• Health care added 45,000 jobs in September

• Employment rose in home health care services (+13,000), hospitals (+12,000), and nursing and residential care facilities (+9,000).

• Employment in government rose by 31,000, by 16,000 in local government, and by 13,000 in state government.

• Employment in social assistance increased by 27,000, primarily in individual and family services (+21,000).

• Construction employment continued to trend up in September (+25,000)

• Nonresidential specialty trade contractors added 17,000 jobs.

Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services, the BLS adds.

The dollar is soaring, after September’s jobs report smashed forecasts.

The dollar index has jumped by almost 0.6%, putting it on track for its biggest one-day jump in four months.

This is crushing the pound’s attempts to rally – sterling is now down 0.2% today at $1.31, cementing the chances that this week will be the pound’s worst in over a year.

Newsflash: Hiring across the US accelerated last month, with many more jobs created than expected.

The US non-farm payroll rose by 254,000 in September, new data from the US Bureau of Labor Statistics shows.

That’s better than expected, and will be welcomed in the White House as a sign that the US economy is not weakening.

The BLS says:

Employment continued to trend up in food services and drinking places, health care, government, social assistance, and construction.

The US unemployment rate has fallen, to 4.1% from 4.2% the previous month.

August’s non-farm payroll has been revised up too, from +142,000 to +159,000.

The European Union is to adopt tariffs on China-made battery electric vehicles (BEVs) following a vote today.

In a statement the EC says:

Today, the European Commission’s proposal to impose definitive countervailing duties on imports of battery electric vehicles (BEVs) from China has obtained the necessary support from EU Member States for the adoption of tariffs.

This represents another step towards the conclusion of the Commission’s anti-subsidy investigation.

Back in June, the EC announced it intended to impose tariffs of up to 38% on imports of Chinese electric vehicles, triggering duties of more than €2bn (£1.7bn) a year.

According to Reuters, EU countries failed to vote clearly in favour or against tariffs on Chinese electric vehicles, leaving the European Commission to decide what to do.

Germany has opposed the plan, concerned that a trade war with China would hurt German exports when its economy is already weak.

September was a strong month for the UK construction sector, partly due to falling borrowing costs, new data shows.

The latest survey of purchasing managers across UK building firms has found that business activity accelerated to its fastest rate in nearly two-and-a-half years.

Builders report a rise in new work, thanks to increased willingness-to-spend among clients and a more supportive economic backdrop.

This lifted the S&P Global UK Construction PMI to 57.2 in September, up from 53.6 in August, signalling faster growth (50 poinst = stagnation).

Civil engineering, commercial building, and house building all strengthened.

Indeed, the upturn in residential work was the fastest since March 2022, suggesting recent falls in mortgage rates are stimulating the market.

Tim Moore, economics director at S&P Global Market Intelligence, says:

“UK construction companies indicated a decisive improvement in output growth momentum during September, driven by faster upturns across all three major categories of activity.

A combination of lower interest rates, domestic economic stability and strong pipelines of infrastructure work have helped to boost order books in recent months.

Simon French, chief economist at investment bank Panmure Liberum, says Huw Pill is “striking a different tone” to Andrew Bailey in his interview with the Guardian.

French adds:

Market doesn’t believe it with 92% likelihood of November cut, & 60% for a December follow-up cut. But it is a clear message even the internal MPC members are split on pace of removing restrictiveness:

The pound jumped as traders reacted to Huw Pill’s call for a cautious approach to interest rate cuts.

It rallied as high as $1.3164, up from $1.312 last night,before settling back at $1.315

That recovers some of the pound’s losses yesterday, and means this might only be sterling’s worst week since July 2023.

Newsflash: The chief economist of the Bank of England has warned against cutting interest rates “too far or too fast”, a day after his boss signalled that the BoE could take a “more aggressive” position.

Huw Pill has told the Institute of Chartered Accountants for England and Wales this morning that there is “ample reason for caution” in assessing how far inflationary pressures have dissipated, and thus how quickly borrowing costs should fall.

Pill says:

While further cuts in Bank Rate remain in prospect should the economic and inflation outlook evolve broadly as expected, it will be important to guard against the risk of cutting rates either too far or too fast.

For me, the need for such caution points to a gradual withdrawal of monetary policy restriction.

This is quite a contrast with governor Andrew Bailey’s comments to the Guardian this week – he told us there was a chance of the Bank becoming more “a bit more activist” in its approach to cutting interest rates, if the news on inflation continued to be good.

Pill is a hawkish member of the Bank’s monetary policy committee – he was one of four policymakers who opposed the rate cut in August, but were outvoted by the other five members of the MPC.

He tells the ICAEW that he hopes to deliver “robust monetary policy” that will guide inflation back to target, while avoiding volatility in economic activity and employment.

Sounding almost evangelical about the Bank’s mission, Pill explains:

Rather price stability is a foundation – you could even argue, the foundation – of a thriving, modern, vigorous and growing UK market economy, which provides opportunities for all: precisely what I would envisage as an ‘economy-fit-for-thefuture’.

Focusing monetary policy on the achievement of price stability is therefore not just a legal and institutional obligation for members of the MPC. It is the right thing to do. That is certainly my view; and I know that I am joined in this by my colleagues. We are in the price stability business.

Today’s rally means Brent crude has now climbed by 8.7% so far this week, to above $78/barrel.

That would be the biggest one-week gain in percentage terms since early October 2022.

Jim Reid, strategist at Deutsche Bank, told clients this morning:

Markets have remained focused on the Middle East over the last 24 hours, as investors weigh up the likelihood of a fresh escalation and how Israel might respond to Iran’s missile strikes last Tuesday.

That response from Israel is yet to materialise, but there was a fresh spike in oil prices after President Biden was asked whether he’d support an Israeli strike on Iran’s oil facilities, and he said “we’re discussing that”

Oil prices are climbing again today, pushing Brent crude over $78 per barrel for the first time since the end of August.

The rally comes after former Israeli prime minister Ehud Barak has predicted that Israel is likely to mount a large-scale airstrike against Iran’s oil industry and possibly a symbolic attack on a military target related to its nuclear programme.

That follows president Joe Biden’s off-the-cuff comments yesterday that his administration has been “discussing” possible Israeli plans to attack Iran’s oil industry.

Today, the Israeli military tells residents of over 20 more southern towns in Lebanon to evacuate immediately, following overnight strikes on Beirut:

Rachel Reeves also paved the way for a rise in capital spending at the budget later this month, dropping the broadest possible hint that she could change the government’s fiscal rules to enable this.

“We’ll set out details of the fiscal rules at the budget, but we have got to make sure we unlock that space for capital investment,” she told journalists ahead of a visit to the Liverpool city region today to announce almost £22bn of funding over 25 years for carbon capture and storage projects.

The Guardian will be at the trip with the chancellor, prime minister Keir Starmer, and energy secretary Ed Miliband, later this morning.

Reeves suggested she could outline upgraded investment plans at her 30 October tax and spending event. At the Conservatives’ last budget in March forecasts showed public investment was set to fall from 2.4% of national output to about 1.7% by 2028-29. Labour’s manifesto plans would limit that drop to about 1.8%.

However, Reeves hinted she could go further, saying of Tory plans to cut investment spending that she was “not going to make those mistakes”.

She said:

“They were cutting back on investment, at exactly the time we need to be increasing investment in our economy.

“I haven’t hidden my ambitions to want to boost capital spending in the UK. I absolutely want to do that, it’s how to break out of this sort of doom loop of low growth and deteriorating living standards. That means prioritising capital investment, particularly capital investment that leverages in the private sector.”

The Institute for Fiscal Studies estimates that keeping investment at current levels as a share of GDP would cost £24bn a year of additional spending by 2028-29. To avoid real-terms cuts over the same period would mean a top up of about £18bn by that year.

Merseyside is currently the place to be for big Labour announcements. The chancellor’s comments come after she used her conference speech in Liverpool last week to suggest she could relax her fiscal rules to engineer an investment boom.

There are more details on her options for doing so here:

Rachel Reeves has said Britain’s economy faces heightened risks of an inflation shock from a spiralling conflict in the Middle East.

Speaking to journalists ahead of a trip to the Liverpool city region today to announce a multibillion pound investment in carbon capture and storage, the chancellor said the Treasury was closely monitoring developments amid escalating tensions between Israel and Iran.

Reeves referred to the Guardian’s exclusive interview with the Bank of England governor, Andrew Bailey, on Thursday, where he warned of “very serious” risks to the economy from the worsening conflict with potential to reignite inflationary pressures.

“I very much accept what the Bank of England governor said yesterday,” the chancellor said, adding:

“This is a very real risk to the UK and global economy

“There’s a risk both on inflation and on GDP. It’s something we’ll keep a close eye on, these things. So far the response has been quite minimal but obviously these are important things to keep an eye on.”

Reeves said that although oil prices had risen sharply in recent days (see earlier post) they remained significantly lower than the levels seen a year ago, while highlighting that equity markets had remained relatively calm despite the mounting fears over the Middle East conflict.

“I recognise that there are big risks, there, if this does become a full blown regional conflict,” she said. The chancellor warned the main dangers for inflation were currently coming from disruption in the Red Sea to global shipping, which was driving up the cost of freight shipments, where Houthi rebels, backed by Iran, have been attacking international freight.

She said:

“The biggest impact so far in terms of economics of what’s happening in the Middle East is on shipping costs.”.

Oil prices spiked on Thursday after President Joe Biden suggested his administration has been “discussing” possible Israeli plans to attack Iran’s oil industry in retaliation for the Iranian ballistic missile attack on Tuesday. The price of a barrel of oil shot up by about 5% to about $77. However, that remains below a peak this year of over $90 a barrel back in April.

Economists warn a spiralling conflict pushing up oil prices and freight costs could unpick progress to bring down inflation over the past year, which has enabled the world’s most powerful central banks to begin cutting interest rates. Bailey told the Guardian on Thursday that if the news on inflation remained good, the Bank could be in a position to be “a bit more aggressive” on cutting borrowing costs.

The oil price is on track for its biggest monthly gains in over a year, as tensions in the Middle East have risen alarmingly.

Brent crude, the international benchmark, has climbed by 7.8% so far this week, to $77.60 per barrel, a gain of $5.60.

That would be its biggest percentage gain since February 2023, and largest dollar rise since October 2023.

Fears of potential supply disruption have lifted oil.

It jumped on Tuesday, when Iran launched its missile attack on Israel, and again yesterday when US president Joe Biden said the US was discussing with Israel the possibility of Israeli strikes on Iran’s oil infrastructure.

Brent crude is currently at a one-month high.

But, it’s still effectively flat for the year, and much lower than after Russia’s invasion of Ukraine in 2022 when oil jumped over $100/barrel.

Derren Nathan, head of equity research at Hargreaves Lansdown, says the potential for disruption to Iranian production has been the key driver of the oil price this week.

Nathan explains:

Despite US sanctions, Iranian exports have increased to 1.7mn barrels per day this year.

But to put that in context, OPEC+ nations have treble that amount in spare capacity, so unless other producing nations suffer disruption, they should be able to take up that slack. However, a more worrying scenario would be the closure of the Straight of Hormuz, a vital shipping channel between Iran and Oman which has recently carried as much as 15mn barrels per day of crude, leaving potential for a significant oil price shock if marine traffic is blocked.”

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

After a bruising few days, the pound is on track for its worst week in over a year.

Sterling has lost around 1.7% against the US dollar so far this week, as it dropped by 2.2 cents since Monday to around $1.314 this morning. That puts the pound on track for its biggest weekly loss since July 2023 – any weaker, and we’ll be back to February 2023.

It has weakened as global investors have rushed into safe-haven assets, while economists are anticipating faster cuts to UK interest rates than previously expected.

As we covered yesterday, the pound hit a three-week low against the dollar on Thursday after Bank of England governor told The Guardian that the BoE could become “a bit more activist” and “a bit more aggressive“ in its approach to lowering rates, if inflation pressures keep weakening.

That put the skids under the pound:

Before Bailey’s comments, traders had expected the BoE to be more cautious than its US and eurozone counterparts.

Not any more! RBC Capital Markets, for example, now predict the Bank could cut rates by a quarter-point at its next five meetings, bringing rates down from 5% today to 3.75% by next May.

The money markets predict slightly less easing, though – they indicate rates could have fallen to 4% by next May.

The second factor hitting the pound is a surge of money into the US dollar, which is trading near a six-week high against a basket of currencies.

Investors have sought out the safety of the greenback as Middle East tensions have risen this week, with Iran launching a missile attack at Israel and the Israeli military striking parts of Beirut.

Hubert de Barochez, senior markets economist at Capital Economics, fears the pound could be heading for more weakness, telling clients:

The British pound fell sharply on Thursday, and we suspect that it will weaken more over the next year or so given our dovish view of Bank of England policy, the currency’s still-high valuation, and stretched speculative positioning.

Also coming up today

We’ll hear from Huw Pill, one of the more hawkish policymakers at the Bank of England, this morning.

Investors are bracing for the latest US jobs report today, the last-but-one non-farm payroll before the US presidential election. It’s expected to show around 140,000 jobs were created in America last month, very slightly lower than in August.

And in the UK, the government has pledged nearly £22bn to fund carbon capture and storage projects as it tries to hit climate targets.

The chancellor, prime minister and the energy secretary, Ed Miliband, will unveil the details on a visit to the Liverpool city region on Friday declaring a “new era” for clean energy jobs.

The plan means Rachel Reeves is paving the way for a multibillion-pound increase in public-sector investment at the budget…

The agenda

• 8.30am BST: Eurozone construction PMI for September

• 8.55am BST: Bank of England’s chief economist Huw Pill to speak at the Institute Chartered Accountants in England and Wales annual conference

• 9am BST: UK new car registrations for September

• 9am BST: UN food price index for September

• 9.30am BST: UK construction PMI for September

• 1.30pm BST: US non-farm payroll jobs report for September