Weak jobs data in the US may delay further the first Fed hike

Week in review: Though the unemployment rate remained flat at 5.1% in September, the latest US labour report my have been weak enough to delay further a first hike by the Federal Reserve. Non-farm payrolls were up 142 thousand in September below analysts expectations of 200 thousand. August numbers were also revised down. Wages, as in previous months, remained flat mom in September, and the yoy rate was a very moderate 2.2%. Given the consequences of first hike (that tend to generate instability in financial markets), the Fed may prefer to remain on hold for longer than previously expected to make sure that the current weakness is temporary or more persistent.

The euro area unemployment rate remained unchanged in August relative to July at 11%, down from 11.5% in August 2014. The decline in the unemployment rate has been continuous but gradual, reflecting pockets of high structural unemployment rates in countries such as Greece and Spain. Germany continues to outperform its peers, with the unemployment rate at 4.5%, the lowest rate in the euro area, and possibly reflecting some economic overheating. In Portugal, the unemployment rate edged up 0.1% to 12.4%, but is down 1.2p.p. relative to August 2014. Note that the Eurostat methodology for estimating the unemployment in Portugal is different than that used by the national statistics office.

In Portugal, industrial production decelerated in August to 1.8%, down from 3.1% in July. Industrial production in the manufacturing sector was broadly flat at -0.1%yoy after +1.7%yoy in July. On the fiscal front, the Parliament’s technical unit in charge of supervising budget execution has confirmed that budget execution in January to August 2015 has improved relative to the same period of 2014 and that the 2015 Budget can accommodate for slippages that have been identified on certain items.

Week ahead: Portugal’s general election will be held on Sunday. The centre-right coalition Portugal à Frente that suported the Government over the last four years is ahead in the polls (between 5 and 12 points distance relative to the socialist party PS) but still below absolute majority. A weak majority by the coalition may bring about some instability, which would be unwelcome particularly given the urgency in preparing the 2016 Budget.