Today’s US jobs data turned out to be a positive surprise indeed. The NFP report for July showed that the US economy added 943k jobs - above the consensus estimate of 900k. The unemployment rate fell from 5.9% to 5.4% (vs exp.5.7%). Also, wages grew at a rapid pace and jumped from 3.6% YoY in June to 4.0% YoY in July (vs exp. 3.9%). By the way, rising wages are particularly interesting given that the US will release its inflation figures next week (Wednesday, 1:30 pm BST). Are we set for another upside surprise, this time in terms of price growth?
As far as composition of job gains, employment picked up rapidly in leisure and hospitality (+380k), education (+261k), professional and business services (+60k), transportation and warehousing (+50k), health care (+37k) among others.
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Source: Bloomberg via ZeroHedge
Also, as some pointed out, in the US there are now more job openings than unemployed workers - a phenomenon last seen before the pandemic when the US job market was at its finest. Nowadays employers struggle to find qualified workers for their open positions, which obviously impacts wage levels. Even though many of those job openings may be filled in the following months once all emergency unemployment benefits expire, the situation is quite remarkable.
Source: Bloomberg via ZeroHedge
Will the Fed perceive the 943k print as “substantial progress”? We shall see, but it seems that the figure has just increased the chances of QE taper discussion during Jackson Hole (end of August) or September meeting (21-22 Sept.) - at least based on markets’ reaction and the narrative presented by some market participants. US bond yields jumped after the release, with the long-end bond yields advancing the most. The sell-off on the bond market might signal that the QE taper discussion is expected to happen sooner, rather than later. Earlier the Fed’s Waller said that he would like to see two strong jobs reports in order to do an announcement by September - one might assume that we’ve just witnessed one. Therefore, all eyes will be shifted on the next NFP release.
US Treasury 10y yield spiked after jobs data. At press time it is trading just slightly above the 1.30% mark (+7 bps on the day) - highest since mid-July. Source: Bloomberg via ZeroHedge
