Job growth is weaker than expected – mixed on Wall Street

Job growth is weaker than expected – mixed on Wall Street

209,000 new jobs were created in the US in June. Up front, 230,000 new jobs were expected in June, according to estimates compiled by Bloomberg, after 339,000 new jobs were created in May.

When the report was submitted on Friday, the expected unemployment rate closed at 3.6 percent. This is down from 3.7 percent in the previous month.

Furthermore, job growth for the previous two months was revised down by 110,000 jobs.

– The numbers are surprising, because for almost a year the forecasts have been on the higher side, says Anders Johansen, chief strategist at Danske Bank.

The jobs report is considered by many in the market as the most important indicator of the temperature of the US economy. Among other things, it shows how many non-agricultural jobs were created last month, often referred to as “the most significant number of the month”.

Job growth was somewhat weaker than expected, but on the other hand, the report shows that wage growth was somewhat higher than expected, with monthly growth of 0.4 percent and annual growth of 4.4 percent.

The leading stock market indices opened slightly lower on Friday. This is how it looked at the end of the stock exchange:

  • The Dow Jones Industrial Average fell 0.3 percent
  • The S&P 500 collective index ended unchanged
  • The technology-heavy Nasdaq Composite Index rose 0.1 percent

dollar decline

The numbers are reflected in the foreign exchange market on Friday, as the dollar index weakens. Against the krone, it decreases by ten oers, so that the price of one dollar is now NOK 10.68.

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Expectations of continued healthy job growth were boosted on Thursday, when the so-called ADP numbers came in much stronger than expected. This led to higher interest rate expectations. On Friday they back off.

– The reaction of the market should be seen in light of the fact that expectations have risen sharply in advance. But this report was still strong, and supports the assessment of the new increase in July, says Handelsbanken chief economist Marius Gonsholt Hov.

– but it can slightly reduce the risk of two more spikes before the peak is reached. Having said that: There will be a number of important numbers ahead of the next interest rate meeting in September, he continues.

narrow job market

Earlier this winter, labor market reports were so strong and startled many economists that a recession was expected as a result of the sharp rise in interest rates. She described the January figures as “shocking” and “hard to believe”.

Johansen says Friday’s numbers indicate that the US labor market is “starting to change.”

One is that the unemployment rate is as expected, plus hourly wages are on the rise. It is not completely uniform, but at the same time it is a clear sign that the economy is performing less than expected.

On Thursday of this week, the JOLTS report for May was also released, which showed that the number of vacancies decreased from 10.3 to 9.8 million from April to May. The initial estimate was 9.9 million. The number of vacancies remains very high, while unemployment is at its lowest level in 50 years.

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According to Anders Johansen, chief strategist at Danske Bank, the figures presented on Friday were surprising.

According to Anders Johansen, chief strategist at Danske Bank, the figures presented on Friday were surprising. (Photo: Oyvind Elfsborg)

Waiting for a jump in interest rates

At the previous rate meeting in June, the US central bank did exactly as expected and kept the key rate steady – but the market got a surprise.

The market is now pricing in a high probability that the interest rate will be raised by 0.25 percentage point at the next interest rate meeting on July 26th.

– A high probability of a rate hike in July has been estimated, and I think it will remain so, but the market is not pricing in a second rate hike. The most important thing, Johansen says, is not how high the interest rate is, but how long it will stay at the higher level.

The Monetary Policy Committee sharply revised the interest rate path upwards in its “point charts”. Dot charts tell what the members of the Federal Reserve’s interest rate committee think about the level of interest rates in the future. Prior to the meeting, this outlook was expected to point in the direction of one rate hike for the year.

The bottom line is that the Fed’s interest rate committee envisages two more rate hikes this year. In previous point charts, members of the Fed’s interest rate committee thought the average interest rate would be 5.1 percent at the end of 2023. This has now been revised upward to 5.6 percent.

Three of the members expect the interest rate to rise to six percent.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.

Dalila Awolowo

Dalila Awolowo

"Explorer. Unapologetic entrepreneur. Alcohol fanatic. Certified writer. Wannabe tv evangelist. Twitter fanatic. Student. Web scholar. Travel buff."

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