US Dollar: Soft labor firmer services outlook – TD Securities

TD Securities strategists notes that United States (US) JOLTS job openings fell more than expected in June, though they remain elevated versus private indicators. They also expect the United States (US) ISM Services Index to rise in July, projecting 55.0 versus June’s 54.0 and a consensus of 54.5. They see higher activity and new orders as key drivers, with some payback in employment. The forecast has been revised up from 54.5, supported by strong ISM manufacturing components and firmer high-frequency data.

Services gauge seen rebounding in July

"JOLTS job openings declined more than expected to 7,359k in June from 7,537k in May (TD: 7,000k, cons: 7,454k). Openings are still elevated relative to private sector indicators, and we expect that over time the BLS data will catch down to the subdued trend."

"The labor market is still far from tight, continuing the story of a curious sense of stability. The vacancy-unemployment ratio continues to hover around 1.0%, also suggesting no signs of labor market tightness."

"We expect ISM services will increase to 55.0 in July after declining to 54.0 in June (cons: 54.5). The main drivers will likely be higher activity and new orders, while employment likely partly gave back its June gains."

"Note that our forecast is now higher than originally published in our weekly at 54.5. ISM manufacturing's employment and supplier deliveries indices were strong in July. Other high frequency data published on Monday also point to a firmer ISM services print."

"The details of the report tell a similar story to May. The quits and layoffs rates both went sideways near cycle lows. Meanwhile, the private sector hires rate moved up 0.1pp to 3.7%, also remaining near cycle lows."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)