US: A troubling jobs report as unemployment rate unexpectedly jumped to 4.3% in Jul – UOB Group
The latest US Employment Situation report by the Bureau of Labor Statistics (BLS) last Fri (2 Aug) possibly marked a turn in the sentiment for the US labor market. It reported a worse than expected (but still positive) Jul job creation while unemployment rate moved surprisingly higher to 4.3% and wage growth cooled more than forecast, UOB Group senior economist Alvin Liew notes.
Expect two 25 bps cuts in Sep and Dec
“The Jul US employment report was troubling, as job creation slowed sharply to 114,000, but more damaging was the spike in unemployment rate to 4.3% (highest since Oct 2021) as unemployed numbers rose further by 352,000 in Jul while participation rate edged up slightly to 62.7%. Wage growth cooled more than forecast to 0.2% m/m, 3.6% y/y in Jul, ebbing inflation worries.”
“While job creation in the first 7 months was clearly on a moderating trend (compared to the prior three years), there was also a narrowing base of job creation among the sectors in Jul with more services sectors losing jobs.”
“The ‘triggering’ of Sahm indicator on US recession due to the spike in unemployment rate set off the equity market selloff and a sharp repricing of rate cuts and a rush of analysts revising their calls to more and deeper Fed rate cuts this year. We keep to our forecast of two 25 bps cuts in Sep and Dec, but we acknowledge the balance of risk has swung sharply from less (or no) cuts to markedly more and deeper cuts.”
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FXStreet Insights Team
FXStreet
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