Despite the closure of a large toy retailer and the loss of jobs which ensued, the US economy has continued to produce jobs at a decent pace, drawing additional Americans into the workforce and reducing the number who wish to work more hours than they do at the moment.
According to the US Bureau of Labor Statistics, the US economy created 157,000 jobs in the non-farm sector in July. The latest figures also include upward revisions to previous employment numbers and figures for May and June were revised up by a total of 11,000.
ANZ senior economist Daniel Gradwell said it was worth looking past the headline figures. “June was revised up [by] 35,000, leaving total NFPs in line with expectations and with 32,000 workers getting laid off after Toys R Us’ insolvency, underlying momentum is probably stronger than the headline suggests…” He also said the figures would not affect the US Fed’s plan for the normalisation of US interest rates. “Overall, there is nothing here to deter the FOMC from its anticipated tightening path.”
Economists were expecting around 193,000 additional positions and US financial markets reacted by sending both short-term yields and longer-term yields lower. At the close of business, 2 year bond yields were 1bp lower at 2.65%, 10 year yields had fallen by 4bp to 2.95% and the yield on 30 year Treasury bonds had lost 3bps to 3.09%. The US currency was a little stronger against the euro and sterling but weaker against yen. According to cash futures prices, the implied probability of a rate rise by the US FOMC at its September meeting remained unchanged at 91.2% while the probability of an additional rate rise in December slipped from 67.65 to 66.8%.