Concerns about US labour market grow

Kia ora,

Welcome to Wednesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news the US Fed is meeting but flying blind on both inflation and jobs data. But other indications suggests the US economy is fading faster than previously assumed.

In the US oil patch, the Dallas Fed said service sector activity contracted further in October with the revenue index, a key measure of service sector conditions, falling to its lowest reading since July 2020. Employers are shedding jobs, they noted

Things weren't great in the mid-Atlantic states region but not as tough as in Texas. The Richmond Fed's factory survey contracted less in October than September, but they also reported employers shedding jobs.

Despite those two reports, the ADP Employment Report indicated that private payrolls rose an average of +14,000 jobs per week in the four weeks ending on October 11, as they move to fill the labour market data void because of the BLS shutdown. If that pace holds for October, US jobs growth in the month will be about +57,000 and better than the -32,000 in September decline. Both are unusually low levels. (In October 2023, the US reported +186,000 job gains, so they have fallen a long way since then.)

Also not as negative as expected is US consumer sentiment as measured by the Conference Board. It did ease lower in October, but not as low as some had feared although it is now at a six month low. Those on low incomes (under US$75,000/year) or over 55 years were more negative than those 35-55 and on higher incomes.

But overnight a range of large employers announced job cuts. UPS said it has shed -48,000 jobs, Amazon -14,000. They aren't the only ones. On top of the US Federal Government furloughs, they are facing some significant labour market strain

The Fed will likely deliver a -25 bps rate cut tomorrow.

Across the Pacific, South Korea said its economy grew +1.7% real in Q3-2025 from the same quarter in 2024, building on a widening expansion. Over the past year, all of their growth has come in Q2 and Q3-2025.

Chinese president Xi and US president Trump are due to meet to try and work out a trade accommodation. It will be ironic that Trump can compromise with another dictator, but not with elected representatives in his own country.

In India, they reported that their expansion of industrial production held up better than expected. It rose +4.1% in August and that was expected to ease to +2.6% in September. Burt in fact their fast expansion rolled on with a +4.0% gain last month. Their factory sector rose +4.8% on the same basis. This is a very good result for them.

In Europe, inflation expectations dipped slightly to 2.7% in October

Later today, Australia will report its September inflation results, both their quarterly CPI and their monthly inflation indicator. Both are expected to rise to the 3% level. Recent comments by the RBA governor suggest they are in no hurry to cut their policy rate, given inflation remains high and their labour market is still expanding. They next review their cash rate target on Tuesday, November 4, 2025.

The UST 10yr yield is now at 3.99%, dipping another -1 bp from yesterday.

The price of gold will start today at US$3956/oz, down another -US$37 overnight.

American oil prices are down -US$1.50 from yesterday at just on US$60/bbl, with the international Brent price just under US$64.50/bbl.

The Kiwi dollar is now at just on 57.8 USc, and up +10 bps from this time yesterday. Against the Aussie we are down -10 bps at 87.8 AUc. Against the euro we are up +10 bps at 49.6 euro cents. That all means our TWI-5 starts today at just under 62.3 and up +10 bps from yesterday.

The bitcoin price starts today at US$115,406 and down a minor -0.2% from this time yesterday. Volatility over the past 24 hours has again been modest at just on +/- 1.0%.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again tomorrow.