The first Friday of every month brings the release of the US Employment Situation. Today’s nonfarm payrolls report showed an increase of 157,000 jobs in the month of July. While the headline number is a bit softer than the ~+200,000 figure that we have grown accustomed to over the past year, payrolls for May and June were revised higher by 59,000. In sum, the headline figure including revisions maintains the roughly +200,000 run-rate. The labor market is hanging in there and there are rumblings of labor shortages in various regions and sectors, yet the labor participation rate held steady this month at 62.9%, even as wages logged a year over year increase of 2.7%. It is always important to look at the labor participation rate in tandem with the unemployment rate. Unemployment for the month of July ticked down 0.1% to 3.9% month over month. It is also noteworthy that 170,000 jobs came from the private sector with professional and business services contributing 51,000 jobs. Meanwhile, government payrolls were reduced by 13,000.
A softer headline US jobs print neutralized the greenback’s advance on a trade-weighted basis. Taken in concert with overnight Chinese forex moves to stabilize the yuan and their announced $60B tariff retaliation, the result is a farily quiet USD-CNH currency cross. Weaker global PMI’s (purchasing manager’s indices) have been a bit concerning of late particularly in Japan, but G7 currency conditions remain benign. Some volatility might be expected as the US treasury rolls out its next round of bond auctions.
As a side note, Apple Inc (AAPL) became the world’s first trillion dollar yesterday. Meanwhile, Facebook (FB) is losing investors and trying to shake off its ugly earnings report. A tale of two tech titans, I suppose. More importantly, TWP is cautiously optimistic on a risk-adjusted basis. Vigilance is key to our process.
Market Outlook: Bullish USD, Bearish Duration, Bullish Equities