U.S. payrolls rise less than expected, dampening bets on Fed rate hikes. Dollar plunges, giving yen a lifeline; Gold recovery accelerates Stocks recover, Dow hits record despite Nasdaq losses
The US labor market is cooling more than expected
The U.S. economy created fewer jobs than expected in June, allaying fears of looming price hikes and pushing back full price until later in the year. grew by only 57,000 last month, while April and May figures were revised down by 74,000 total jobs.
However, this figure fell unexpectedly, largely due to a decline in the participation rate, which fell to its lowest level in five years.
Hopes that the World Cup would boost hospitality jobs in host cities have not materialized. Instead, employment in the sector fell by 61,000, the largest decline since December 2020.
Although June’s numbers may well be revised upwards, they have removed the immediate threat of a surprise rate hike in July, and September’s odds have also fallen sharply. Investors now don’t see the Fed raising rates until December.
Markets applaud bad data and falling oil
When it comes to markets, bad news is good news, as a colder labor market means the Fed is more likely to hit its 2% target with a modest adjustment in interest rates. The danger going forward is that the data could still go one way or the other as employment indicators remain mixed.
The hard-to-get jobs index — a subindex of the consumer confidence gauge — jumped in June to its highest level since the pandemic. This casts doubt on the latest drop in the unemployment rate, which has historically had a strong positive correlation with the hard-to-get jobs index.
At the same time, weekly figures remain weak, falling again last week, and other data continues to point to a healthy economy.
Under such conditions, it is more likely that the Fed will remain status quo, with continued declines in oil prices further easing pressure for possible tightening.
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