Daily Economic Outlook: 2nd October, 2015

The key focus for today will be on the US labour market report for September. Following the FOMC's decision not to increase policy rates last month, speculation has remained over the timing of the first hike. Comments from various Fed officials, including Chair Yellen, have expressed support for a lift-off before year end, although interest rate markets put the probability of a move this year at around 40%. While external developments are likely to remain key, the domestic picture will also remain a key consideration, especially developments in the labour market. 

Today's employment report is expected to show continued tightening of the labour market, with nonfarm payrolls forecast to increase by 200k in September, says Lloyds Bank. The unemployment rate is forecast to stay at a 7-year low of 5.1%. This nevertheless is likely to be understating the degree of slack in the labour market, given the low participation rate and high involuntary part-time employment. While wage growth continues to be relatively subdued, an average hourly earnings growth is expected to edge up to 2.4%, anticipate Lloyds Bank. 

Ahead of the US payrolls report, the light European economic calendar will provide little distraction with the UK construction PMI and euro area producer price inflation, the only noteworthy releases.