First take: Hiring slowdown traced all the way to China
What happens in China apparently ripples across the Pacific Ocean to the U.S. labor market.
With the domestic economy on solid ground, few experts figured that recent economic troubles in China and other emerging markets would make a dent in the steady U.S. jobs engine.
But Friday's disappointing payroll report – just 142,000 jobs were added last month - and downward revisions to an already weak showing for August – underscores that China's slowdown, and the resulting turbulence in stock markets, have taken a broader psychological toll on the hiring plans of U.S. CEOs.
"We believe the weakness in payroll employment growth and hours worked reflect the deceleration in activity abroad and, more recently, the pickup in financial market volatility domestically," Barclays Capital wrote in a note to clients. "Past experience suggests that these episodes temporarily weigh on demand for labor."
Such a reaction would appear to defy economic fundamentals. Exports to China represent less than 1% of US gross domestic product. To be sure, China's devaluation of its currency in August further strengthened the dollar, which has hurt U.S. exports broadly as foreign buyers pay more for U.S. products.
And low oil prices continue to dampen drilling activity and production of steel and elated materials. Oil companies cut 12,000 jobs in September, continuing a recent trend. And manufacturers, battered by the effects of both the greenback and crude prices, have shed 18,000 positions the past two months.
But low oil prices mean cheap gasoline that has fallen near $2 a gallon across much of the country, leaving consumers more cash for discretionary purchases. Consumer spending, which makes up more than two-thirds of the economy, has been accelerating on cheap gas, strong job and income growth, and sharply reduced household debt.
Also, the housing market's recovery from the mid-2000's crash has advanced this year, with both sales and starts accelerating. Building a new house has wide positive impacts on the economy, employing construction workers and prompting buyers to fill their homes with furniture and appliances.
But nowadays, what happens across the globe and in financial markets can have outsize effects on the U.S. economy, fomenting fear and uncertainty. Many Standard & Poor's 500 companies derive as much 40% of their revenue from overseas. And a reeling stock market dings the confidence of both consumers and businesses. Recent surveys by the Business Roundtable and Deloitte & Touche show that top corporate executives have scaled-down their investment and hiring plans.
Gus Faucher, senior economist for PNC Financial Services, expects the recent slowdown in hiring to be short-lived.
"Job growth should rebound through the rest of this year on the back of consumer spending and housing," he says.
But Barclays Capital cautions: "It takes more than just a few months for these potholes in global growth and uncertainty to fade."
As a result, the firm expects the Federal Reserve to delay its first rate hike in nearly a decade until March 2016.