July payroll increases more than expected

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A job application form is displayed at a restaurant job fair hosted by industry group High Road Restaurants in New York, U.S., May 13, 2021. REUTERS/Brendan McDermid

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NEW YORK, Aug 5 (Reuters) – U.S. job growth rose much more than expected in July and the jobless rate fell, giving the Federal Reserve enough cushion to stay on its aggressive trajectory of rate hike as it tries to control inflation.

Non-farm payrolls rose by 528,000, the Labor Department’s jobs report showed on Friday. June was revised up to show payrolls increased to 398,000 from the previously reported 372,000. Economists polled by Reuters had forecast 250,000 more jobs last month.

Employers continued to raise wages at a solid pace last month. Average hourly earnings rose 0.5% in July after rising 0.4% in June. That brought the year-over-year increase to 5.2%, from 5.1% in June. Read more

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MARKET REACTION:

EQUITIES: S&P e-mini futures fell sharply, latest drop 1.1%

BONDS: The yield on 10-year Treasury bills rose 10.1 basis points to 2.777%; The two-year US Treasury yield rose 15.4 basis points to 3.191%.

FOREX: The dollar index jumped and last rose 0.956% to 106,700

COMMENTS:

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN

“The number is really impressive, but it may be more style than substance. The number of multiple workers has soared by more than 559,000. Is some of the employment strength superficial? and just because people are trying to work harder to make ends meet?”

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The payroll was almost double the amount we were looking for. There’s no indication that this ratio is that low. Unemployment actually went down to 3.5%.”

“This is very hot jobs data. It means the Fed is going to keep raising interest rates. Bonds are crushed. Stocks are falling.”

“At the end of the day, it gives the Fed the upper hand, which is saying we’re not in a recession yet and the Fed is likely to tighten. If we get one more number like this in August, the Fed could increase by 75 basis points in September rather than 50 basis points.”

“I’m surprised at the strength of wage growth, I was looking for a chill. That’s the key to the report. That’s why we’re seeing a sell-off in the bond market and that proves inflation is still a big problem .”

PAUL NOLTE, PORTFOLIO MANAGER AT KINGSVIEW ASSET MANAGEMENT, CHICAGO

“What we heard from various Fed governors this week that it was too early to move away from policy tightening is definitely in place with the jobs report which is THIS hot.”

“When you look at the period from 2015 to 2019, the average jobless job gain was 190,000 and the unemployment rate was north of 4. We’re well below that on the unemployment rate, and we’ve certainly averaged 200,000 to 300,000 new jobs going forward, so the labor market continues to be a lot warmer than historical normal, so that gives the Fed reason to keep increasing rates, and that’s what pisses off the market.

“The number is not a surprise. Some Fed Governors have hinted at this. Inflation numbers next week will complete this picture. The inflation rate will go down, I guess we might go down to 5% or 6% by the end of the year. But the hard part will be getting from that 5%, 6% to 2%. That will require a more aggressive Fed. So the Fed is still on the verge of “Raising rates, by 75 basis points. makes sense in light of the data, and they will continue at each of their meetings through the end of the year.”

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Compiled by the Global Finance & Markets Breaking News Team

Our standards: The Thomson Reuters Trust Principles.

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