US experiences job losses following Hurricanes Harvey and Irma

The US economy saw a reduction in employment for the first time since 2010 as the labour market was impacted by Hurricanes Harvey and Irma. Employment dropped by 33,000 in September, compared with an expectation of a 90,000 addition and was significantly below the 169,000 created in August. It is widely anticipated that there will be a rebound during October as relief efforts are implemented. However, markets focussed on the annual increase in average hourly wage growth, which accelerated to 2.9% from 2.7% in the previous month and was significantly stronger than expectations. This will add to the justification that the Federal Reserve has to continue on the path of interest rate rises and unwinding of quantitative easing.

Carmakers, in particular, have benefitted from the impact of the hurricanes. During a period of declining car sales, the need to replace destroyed vehicles has caused a spike in deals during September and will likely to continue over the short term. General Motors saw its monthly sales jump 12% versus the year before, causing its share price to rally along with other car makers. However, this will ultimately be a short-lived benefit, and car sales will likely retrace towards more average long-term levels by the end of the year.

Japanese labour practices were placed into sharp focus last week as a 31-year-old media employee allegedly died from overwork after logging 159 hours of overtime in a month. This reality is common enough to have its own word in Japanese, “Karoshi,” which translates to death by overwork. This is part of a wider debate in Japan, where the government wants employers to focus on improving productivity rather than simply creating jobs or growing profits. Importantly, productivity is the improvement of an employee’s output per hour worked rather than their total output. Improvements in productivity are vital to improving prosperity and the work-life balance of the population. However, there are significant cultural obstacles in Japan that need to be overcome, and full reform may take a generation to be achieved.

Index Open Close Change % Change
FTSE 100 7372 7522 150 2.03%
S&P 500 2519 2549 30 1.19%
Dax 12828 12955 127 0.99%
Cac 40 5329 5359 30 0.56%
Nikkei 225 20356 20690 334 1.64%
UK 10 Year Gilt Yield 1.365 1.364 -0.001 -0.07%

UK trade balance data as well as US, French and German inflation figures for September will be released this week.