235,000 jobs were created in the United States last month, suggesting that the highly contagious Delta variant of the coronavirus is inflicting severe damage on the economy. The number, released by the Bureau of Labor Statistics this morning, marked a profound deceleration from July’s upwardly revised 1.1 million-position print, and fell well below median forecasts that stood at 725,000 ahead of the release.
With infection rates surging in many states during the month of August, consumers grew more cautious and many real-time measures of economic activity – from air travel to restaurant receipts – dropped sharply. Fearful individuals put job-seeking plans on hold, while businesses – facing higher levels of uncertainty – paused hiring campaigns. No new positions were added in the leisure and hospitality sector during the survey period, retail employment shrank by 29,000, and 41,500 jobs were shed in food and drink establishments.
This puts tapering on hold: Today’s numbers suggest that that the Federal Reserve’s “substantial further progress” test has not been met. Richard Clarida, widely considered one of the most influential members of the Federal Open Market Committee, told CNBC last week that he would “support commencing a reduction in the pace of our purchases later this year,” if job gains averaged 800,000 per month into the autumn months.
But other details point to widespread worker shortages: The unemployment rate dropped to 5.2 percent from 5.4 percent in July, hitting market expectations perfectly, while a broader measure that includes discouraged and underemployed workers – the U-6 – moved down to 8.8 percent from 9.2 percent in the prior month.
Wage growth rose at the fastest pace in more than a decade: Average hourly earnings climbed 0.6 percent month-over-month – a rate not seen since late 2009 – as businesses competed to hire workers.
Delta could be plateauing: Our read of the latest data suggests that the number of coronavirus infections is rolling over, following patterns seen in other countries earlier in the year. Although hospitals will be dealing with rising patient loads for many weeks yet, the number of new cases identified in many southern states (on a rolling seven-day basis) has lost momentum.
And worker shortages may be transitory: With supplemental federal jobless benefits set to expire this weekend, and most schoolchildren headed back to class, the number of jobseekers is likely to expand in sharply through September.
The jury’s still out: With roughly half the gap with pre-pandemic employment levels now narrowed, the labour market is inching toward recovery, and prices – as evidenced in strong hourly earnings gains – are rising uncomfortably fast. A tapering decision at the November Fed meeting remains highly probable.
The dollar is holding near one-month lows: With liquidity falling across the currency markets as the long weekend begins, the greenback continues to trade defensively. Treasury yields are up marginally, suggesting that the timing of a taper announcement has become less important to markets in general.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.