Higher US unemployment despite higher job growth
US job growth picked up in September, yet the labour market continued to show signs of weakness as it struggled to absorb new entrants. Employers faced headwinds from import tariffs and the adoption of artificial intelligence in certain roles.
The unemployment rate climbed to 4.4%, its highest in four years, up from 4.3% in August, according to the Labour Department’s latest report. August payroll figures were revised to reflect job losses, reinforcing concerns about labour market softness. Meanwhile, average hourly earnings posted their smallest monthly increase since June, a key indicator economists monitor for household spending, which remains heavily skewed towards high-income consumers driving nearly half of total expenditure.
Financial markets remain divided on whether these developments will sway the Federal Reserve towards another 25-basis-point rate cut in December. The steady rise in unemployment since June could bolster the case for more dovish policymakers, though many Fed officials have signalled they remain “open-minded” given persistent inflation pressures, leaving the December rate cut a close call.
UK economy in crosshairs
Key indicators of Britain’s economy, covering business activity, consumer spending and public finances has been weakening ahead of this week’s budget, where finance minister Rachel Reeves is widely expected to announce further tax hikes under close scrutiny from bond markets.
The ONS reported that government borrowing from April to October was the highest on record outside the pandemic period, highlighting fiscal pressures. Data released on Friday suggests budget uncertainty is weighing on sentiment, adding to Reeves’s challenge of reducing borrowing without derailing already fragile growth.
The preliminary November S&P Global PMI showed firms delaying investment decisions amid concerns of a second consecutive year of tax increases. Both services and manufacturing barely expanded, missing all economist forecasts and pointing to just 0.1% GDP growth in Q4 2025. S&P’s chief economist Chris Williamson warned that this pause could tip into contraction if demand-suppressing measures materialise in the budget.
Meanwhile, ONS figures revealed October retail sales fell for the first time since May, signalling softer consumer demand.
Heterogeneous steady growth in eurozone
Eurozone business activity maintained steady growth in November, signalling resilience despite global uncertainty, as services expanded at their fastest pace in 18 months while manufacturing slipped back into contraction, according to the HCOB Flash Eurozone Composite PMI by S&P Global.
The composite index eased slightly to 52.4 from October’s 52.5, just below forecasts but marked its 11th consecutive month above the 50 threshold. Services PMI climbed to 53.1, its highest since May 2024 and ahead of expectations, while manufacturing fell to 49.7 from 50.0, its weakest since June and below consensus.
Germany saw private sector growth lose momentum amid an unexpected manufacturing contraction and slower services expansion, while France’s activity nearly stabilised as stronger services offset deeper manufacturing weakness.
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