Data going back eighteen years shows that fourteen of the August jobs reports have not met expectations at the first try, but twelve of those have seen upward revisions. So the augurs are good for another upward revision to the latest number this year, which would at least allay concerns about the US economy.
Away from job numbers, other indicators are pointing to growth as well. ISM data shows that new orders have hit their highest level in ten years, while car sales have accelerated to levels not seen since 2006. The market implications of this rosy scenario are that short-term US Treasury yields are likely to rise quicker than the long-term variety, which have been held back by safe-haven buying. At 0.6% they have hit their highest level since 2011, a trend that is likely to continue as markets price in a US interest rate hike.
In addition, the rally in the US dollar does not show signs of stopping. Following the latest non-farm payrolls figures, the dollar hit a fourteen-month high versus the euro, and that trend has only continued, while the dollar index is pushing out to levels not seen since 2010.
As data improves investors will continue to buy the US dollar, with the move boosted by the easing stances of the European Central Bank and the Bank of Japan. With China slowing as well, the outlook points towards further gains for the US dollar as the time for a Fed rate hike (whenever that may be) draws nearer.
Finally commodities are set for another bout of poor performance. Although gold is down by around 1% from the beginning of the year, the long-term trend is firmly down, with the metal off by 12.4% since its 2014 peak. Silver, copper and iron ore are in a similar situation, with oil falling thanks to a combination of a rising US dollar and increasing supply.
As we look to Friday, the broad picture is that September’s jobs report will show a bounce back from the August slump, while August’s figure itself should see an upward revision. The US economic recovery continues.