After ‘Super Thursday’ comes ‘Freaky Friday’, except neither particularly lived up to their billing of the game changers that we all hoped for. Today's US jobs report came largely in line with expectations which in usual times would mean very little, yet taken a month before a possible rate hike it means quite a lot.
While this was a somewhat unspectacular report, it provides evidence of a steadily improving jobs market and allows Janet Yellen et al. the platform to finally start raising rates. Unsurprisingly, the winner from such a scenario has been the US dollar while stock markets have taken a knock, with the FTSE 100 down 15 points while the Dow Jones loses 50 points.
The numbers painted a picture of a steady jobs market, with unemployment remaining at 5.3%, as an 8,000 fall in non-farm employment (215,000) was offset by a matching 8,000 positive revision to last month’s figure (231,000). This time even the qualitative readings behaved, with earnings rising in line with expectations at 0.2% while the weekly hours worked ticked up to 34.6.
There is usually a reason to believe the Federal Reserve will see the negative in a release, be it the wage growth or falling participation rate. However, for the hawks among us, this was an ideal jobs report and puts us in a place where the only thing standing between now and a rate hike on 18 September is one more US jobs report in a month’s time.
The prospect of a September rate hike understandably brought out the bears, pulling the Dow down to a new six-month intraday low. Conversely, US dollar strength has been ratified by today's numbers, bringing a likely continued selloff for beleaguered commodities like crude and gold.
Going into next week, the steady realisation that we are realistically going to see a hike in September should provide the dollar with further room to appreciate, while the convergence between bullish European markets and bearish US ones is likely to continue to feature.