If you’re a Federal Reserve official, you’ll find it hard not to be very pleased with the way this week’s gone from a labor market data perspective.
The JOLTS release at the start of the week was extremely encouraging as it continued a clear trend that brought the number of vacancies back to levels not seen in two years and not far from the pre-pandemic norm. Even without today’s report, that will have come as a huge relief for the Fed.
When you consider today’s report on top of that, the week couldn’t have gone much better. The headline NFP may have been a little stronger than expected but it’s still below 200,000 and the beat was more than offset by last month’s revision.
Then there’s average hourly earnings which fell back to 0.2%, a level far more consistent with the Fed’s goal if it can be repeated and again, below market expectations. The cherry on the cake is the participation beat and jump in unemployment, both of which point to more slack appearing in the labor market.
To be clear, the Fed won’t get carried away with today’s report. It’s just one that needs to be repeated on a number of occasions but there’s plenty of cause for optimism in there. If there was any doubt that the Fed will pause in September, today’s report surely puts an end to that debate.
Gold pares gains but continues to push against resistance
Despite all of this, the reaction to the report has arguably been relatively mild. The dollar is lower but has pared much of the earlier declines, as have US yields. Gold initially broke above $1,950 – a level it’s struggled around in recent days – but is now hovering a little below.
Obviously, we should always wait for the dust to settle on this before making a judgment and it will be very interesting to see how the final hours of the week now play out. But on the face of it, this week’s labor market figures don’t appear to have done gold any harm after what has been a rough few months for the yellow metal.
Oil buoyed by US jobs data to near 2023 highs
Oil prices have seemingly responded positively to the labor market figures, perhaps as they signal interest rates may not rise any further and even fall sooner which is better for the economic prospects of the economy over the medium term. They’d already been on a good run though and Brent is now trading around its highest level this year, with no shortage of momentum.
For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA
