US Dollar Still Up After Jobs Report

Published on: 08/6/18 2:45 PM

Category: Uncategorised

The latest United States job report data is in and the results are promising. The employment growth data point came in at +157K. Although this figure fell short of the predicted growth of +193K, the rest of the encouraging statistics from the report showed enough good news to negate the lower than expected figure.

One particular note of encouragement was that the domestic unemployment rate now sits at just 3.9 percent. The outlook for the future is positive as evidenced by the fact that the Atlanta Fed’s Jobs Calculator states that the economy only needs to add an average of 106,000 jobs per month over the next year in order to sustain an unemployment rate of under four percent. Based on current predictions, the economy is projected to meet this figure with ease. With the job growth staying above 106,000, the U3 rating dropped to 3.9 percent. The U6 reading, which adds in workers who classify as part-time for economic reasons, dropped to 7.5 percent. This number is down from the past reading of 7.8 percent. The US Labor Force Participation Rate matched predictions, coming in at 62.9 percent.

Wage growth remained slow yet steady, clocking in at 2.7 percent for the month of July. This figure is consistent with past rates in recent months. Although the rate is solid, it still trails headline inflation which is ringing it at +2.9 percent. With the Consumer Price Index (CPI) at 2.9 percent, financial analysts are concerned that the lackluster wage growth indicates that the real wage growth has remained stagnant. This could spell concern for consumers heading into the second half of the year. This slow rate of growth is a large reason for the Fed wanting to increase rates again before the end of the year in an effort to spark growth.

Immediately following the release of the report, the US dollar had dipped slightly as compared to the Euro and the Japanese Yen. The Dollar Index (DXY) dropped from an opening of 95.15 to as low as 94.99 as a result of the published report. However, the value of the dollar continued to edge higher as markets stabilized. Following the release of Friday’s news, Fed funds futures were estimated at a 90 percent chance of a 25-bps rate hike in September. The prediction also gave a 64 percent chance of a fourth hike in December 2018 to end the year.