Amongst all the political, geopolitical and central bank meetings that have taken place this week, we still have the monthly US jobs report (every first Friday of the month) to look forward to and traders will be as focused as ever on this release.
Job creation in the US has been slowing since the second half of 2018, with the monthly average for this year generating around 165k jobs per month. This is still ahead of the monthly pace necessary to keep the unemployment rate steady but has decelerated from the 200k over the last eight years.
We note that the escalation in the trade war with Trump’s tariff announcement at the start of August may have negatively impacted hiring confidence on the path to the nonfarm reference period. That said, with initial jobless claims near their cyclical low and jobs reported to have been plentiful in the Conference Board’s consumer confidence survey, the labour market is expected to remain fairly healthy in this report.
With unemployment stabilising around 50-year lows, the tight labour market should be enough to sustain growth in wages above 3%. However, base effects and moderate monthly gains may have an effect on the annual earnings reading.
Global risk sentiment has turned more positive this week with trade tensions abating. This has seen a steep sell-off in the dollar, having made new multi-month highs on Tuesday. For this to continue, we would need to see a sharp slowdown in the labour report as this could then prompt the Fed to reconsider easing merely being a ‘mid cycle adjustment’. Conversely, a strong release will be bullish for the buck and see yields move higher.
See below for the key numbers to know ahead of the jobs release tomorrow at 13.30pm (GMT+1):
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