Today's number one event for the financial markets was the release of data from the US labor market. Although the number of jobs in non-farm sectors increased, the US unemployment rate rose, which led to an ambiguous reception of the data.
The US economy added 850,000 jobs in June, the strongest growth in 10 months and well above market forecasts of 700,000 jobs. Notable job gains in June were recorded in leisure and hospitality (343k), public (230k) and private education (39k), professional and business services (72k) and retail trade (67k). Still, nonfarm employment was 6.8 million or 4.4 percent lower than pre-pandemic levels in February 2020. The labor shortage continues to weigh on productive capacity as many companies struggle to hire workers. The likely causes? Extended unemployment benefits, ongoing childcare responsibilities and health concerns may deter some workers from finding work. To deal with the lack of workers, companies are raising wages and benefits. Average hourly earnings in the U.S. increased 0.3 percent.
The U.S. unemployment rate rose to 5.9 percent in June, with the number of unemployed rising 168,000, to 9.48 million, and employment falling 18,000, to 151.60 million. The labor force participation rate remained unchanged at 61.6 percent. The labor market continues to show signs of recovery supported by a broader economic opening, rapid graft and government subsidies. However, employers across the country are complaining of difficulty filling vacancies, citing a continued shortage of workers due to increased Social Security benefits, COVID-19 concerns, and finding child care.
As a result of the above releases, the U.S. S&P 500 Index and Nasdaq hit all-time highs, and the U.S. dollar reacted hesitantly. The EUR/USD exchange rate first fell towards 1.1800, then rose to 1.1858 before retreating to 1.1830. The US data did not significantly alter expectations for Fed action in terms of scaling back its asset purchase program or an interest rate hike planned for late 2022 or early 2023.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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