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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Dow hits record high after US jobs report beats forecasts - as it happened

A US Dollar note.
A US Dollar note. Photograph: Thomas White/Reuters

Summary: US jobs report cheers the markets

Time for a quick recap:

America’s economy has beaten expectations by creating 209,000 new jobs in July. An upbeat Non-Farm Payroll report also showed the jobless rate has fallen to 4.3%, while annual wage growth remained at 2.5%.

The labor force participation rate picked up too. Here are the details

Economists broadly welcomed the news. As Michael Pearce of Capital Economics put it:

The real economy remains on a strong growth path at the start of the third quarter. If the labour market continues to tighten over the coming months, as the survey evidence suggests it will, the Fed will raise rates again later this year.

Many of the new jobs were low-paid, though, while manufacturing continued to shrink as a share of the economy.

Wall Street cheered the NFP report, sending the Dow Jones industrial average to a new all-time high.

Marcus Bullus, trading director of MB Capital, says:

“After seven straight record closes, the Dow’s reaction to Friday’s solid US jobs data has been balanced rather than breathless – with much of the cheerleading left to President Trump.

“But nevertheless there’s much to be reassured by in this comprehensively strong jobs print.

“Yes the headline figures are impressive, both on the job creation and unemployment rate fronts.

“But the details are arguably more important – the participation rate is creeping up as more Americans return to work, and average wages continue their solid upward progress.

“With more Americans working, and more Americans earning more, the US’s consumer-led growth remains firmly on track – powering equities into a sustained bull run.

The dollar is also staging a recovery. It has now surged by 1% against the euro after hitting its lowest level since January 2015 this morning.

Donald Trump welcomed the figures on Twitter (where else?....).

And that’s all for today. Thanks for reading and commenting. GW

Updated

Dollar hits one-week highs

The dollar is continuing to rebound strongly, putting worries about the Russian probe to one side.

The greenback has hit a one-week high against the Japanese yen, at ¥110.99. It’s also at a four-day high against the euro:

Jameel Ahmad, VP of Corporate Research at FXTM, says today’s jobs report has lifted the dollar.

Those hoping that the US dollar would be thrown a lifeline may be in luck, following the news that the United States added another 209,000 jobs to its economy in July

This is an overall positive employment report and highlights the underlying strength of the US labor market. Figures exceeded expectations, with earlier projections sitting at 183,000 and wage growth, with average earnings rising by an annualised 2.5%, being further good news for the US Dollar.

Dow hits fresh record high

Boom! The Dow Jones industrial average has hit a fresh record high in New York.

Wall Street traders piled into stocks as soon as the opening bell rang, following today’s jobs report.

This pushed the Dow up by 62 points, or 0.28%, to 22,088 points.

The open of Wall Street

Investors are encouraged by the news that America’s economy created 209,000 new jobs last month, or almost 30,000 more than expected. The pick-up in monthly wage growth, from 0.2% to 0.3%, has also cheered the markets.

NFP: Low-paid jobs lead the way

Employment site site Indeed.com have sent over a handy chart, showing how many of these new jobs were relatively poorly paid...

US jobs report

....and another one showing how the US factory sector continued to shrink.

US jobs report

Indeed Chief Economist Jed Kolko says:

“This was a banner jobs report. With the strong payroll number in July, job growth in the past three months is ahead of the 2016 pace and way ahead of what’s needed to keep up with population growth. Working-age adults are now more likely to be employed than at any time since the recession.”

“Although wage growth remains stuck at 2.5%, the changing industry mix might be holding wage growth back. Low-wage industries grew fastest in July, led by leisure and hospitality. That’s helping the least-educated Americans get back to work. The recovery is now strong and long enough to lift many of the people hurt most by the recession -- except in manufacturing, which continues to lag overall jobs growth.”

Donald Trump’s upbeat tweet failed to mention that the US labor market has been creating jobs steadily for years.

Today’s employment report is pretty robust, but it also extends a long trend of job creation and moderate wage growth.

Ranko Berich of Monex Europe has tweeted this chart, showing monthly NFP figures (in blue) and the rolling average (in green).

Berich adds that the dollar will probably remain under pressure, despite its rally in the last 50 minutes...

”The move is not yet anywhere near large enough to suggest the greenback’s relentless downwards trend of the last few weeks has been challenged.”

Erik Norland, Senior Economist at CME Group, has calculated that total pay growth remained steady in July.

He writes:

“Non-farm payrolls grew by 209,000 in July, 29,000 better than consensus, while average hours earnings advanced by 2.5%, beating consensus by 0.1%. These numbers are very strong. Meanwhile unemployment fell back to its 17 year low of 4.3%.

“What this means is that total labour income in the US grew by 4.3%, very much consistent with its pace of growth since 2010.

US total labor income

Read the full story

Here’s our US business editor, Dominic Rushe, on today’s US jobs report:

The US economy added 209,000 new jobs in July – the second month in a row of 200,000 plus jobs growth. The unemployment rate fell to 4.3%, a 16-year low.

Economists had forecast the US would add 180,000 jobs in July, in line with the average monthly gain for the last six months.

The latest jobs news will come as a welcome relief for Donald Trump, who was elected on the promise of rebuilding the US jobs market.

“Excellent Jobs Numbers just released,” the president tweeted, “and I have only just begun. Many job stifling regulations continue to fall. Movement back to USA!”

Ahead of the latest figures from the Bureau of Labor Statistics, the president heralded the announcement that Toyota and Mazda would soon be adding 4,000 new jobs at two new US plants.

However, the jobs report showed once again that the majority of gains were in low-paying service industries. Jobs in food services and drinking places rose by 53,000 in July. The industry has added 313,000 jobs over the year. Healthcare employment increased by 39,000.

Job growth in higher-paid sectors including construction, manufacturing and mining was marginal.

Here’s Dom’s full story:

Trump hails jobs report

President Donald Trump didn’t waste any time in welcoming today’s jobs figures, and taking credit for them too....

America’s record-breaking run of job creation continued in July, points out economist Rupert Seggins:

Alan Krueger, who chaired President Obama’s council of economic advisors, says the NFP report doesn’t contain any nasty surprises.

Speaking on Bloomberg TV, he says:

That’s solid for the economy. It says the recovery is continuing at the same pace as before.

Non-Farm Payroll: the details

Beating forecasts....
Beating forecasts.... Photograph: Bloomberg

Here’s more details from the jobs report:

  • Private sector jobs: Up by 205,000, compared with 194,000 in June
  • Government jobs: Up by 4,000, compared with 37,000 in June
  • Factory jobs: Up by 16,000, compared with 12,000 in June
  • Goods-producing jobs: Up by 22,000
  • Construction jobs: Up by 6,000
  • Retail: Up by 900

Updated

Kully Samra, UK managing director at investment group Charles Schwab, says July’s jobs report confirms the strength of the US economy.

And that means the US central bank is likely to raise interest rates again before Christmas, Samra says.

Sustained labour market strength will likely mean that the Federal Reserve remains on track to raise interest rates for a third time this year and announce a plan to start its balance sheet reduction plan, despite a recent ebb in inflation pressures.

This healthy set of figures should bolster labour market buoyancy and goes some way to suggest that there is momentum in the economy to generate some inflation, even though price pressures still remain moderate.

With US stocks drifting along near record highs, this latest jobs report bolsters our view that the US economy remains in robust shape as we continue in this long-term bull market.”

In another encouraging sign, America’s labor force participation rate has risen to 62.9%, from 62.8%.

That suggests that people are returning to the jobs market.

On an annual basis, US earnings grew by 2.5% in July.

That matches June’s figures, and is a “pretty solid” result, according to James Pethokoukis of the American Enterprise Institute:

Dollar jumps after jobs report

The dollar is rallying back from this morning’s lows, as traders welcome today’s No-Farm Payroll report.

This has sent the euro down 0.25% to $1.184, and the pound down to $1.311.

Average earnings in the US economy grew by 0.3% in July, today’s report shows, up from 0.2% in June.

That’s another encouraging sign, although workers might hope for stronger wage growth at this stage of the economic cycle.

Non-Farm Payroll Beats Forecasts

Breaking! America’s economy created 209,000 new jobs last month.

That’s better than most economists had expected, and suggests the US labor market is still recovering.

June’s non-farm payroll has been revised higher too - to 231,000 jobs, from 222,00 originally.

Plus....the unemployment rate has dropped to 4.3%, from 4.4%.

More to follow...

Tension is mounting in the markets ahead of the Non-Farm Payroll report.

The US dollar is hovering at $1.1870 against the euro, close to this week’s two and a half-year low.

Forecasts for today’s Non-Farm Payroll range from a modest 175,000 extra jobs to a robust 220,000.

Non-Farm Payroll: What to watch for

It’s nearly time for the final major economic news of the week - America’s Non-Farm Payroll for July.

The NFP will tell us how many new jobs were created in the US last month (excluding hirings in the volatile agriculture sector), how much workers got paid, and whether people entered or left the labour market.

Payroll forecasts vary widely, as it’s quite a volatile measure (which is why financial types play a game of trying to guess the number each month, with limited success).

Here’s the consensus expectations for the data, due at 8.30am East Coast time or 1.30pm in London.

  • NFP: Up by 183,000, compared with 222,000 in June
  • Unemployment rate: Down to 4.3%, from 4.4% in June
  • Average earnings (monthly): +0.3%, up from 0.2% in June.

Although the job creation number may dominate the headlines, investors may be more interested in the wage growth figures.

Earnings, and inflation, will determine how fast the US Federal Reserve can raise interest rates over the coming months.

Kathleen Brooks of spreadbetting firm City Index explains:

We believe that the wage component, which we do not forecast, will be the most important piece of data from the labour market report on Friday.

If wages only rise by the expected 0.3% on the month, the annual rate is expected to weaken a touch to 2.4% from 2.5%, then it is hard to see how the dollar could stage a meaningful rally, as weak wage growth is likely to hinder the chances of a further rate hike from the Federal Reserve later this year.

Gold bullions are displayed at Degussa shop in Singapore .

The US dollar’s weakness, and general nervousness, is keeping the gold price near a seven-week high today.

Bullion is changing hands at $1,268 per ounce, up slightly today, and close to the highest level since mid June.

That means gold is on track to gain 1% this week, adding to the 2.2% increase in July.

Warren Patterson, analyst at ING, says: (via Reuters):

“Its the same trend we’ve seen for the last month. There’s no change. Its mainly a dollar story.”

Connor Campbell of City firm SpreadEx predicts more pain for the dollar today, if July’s jobs figures are a disappointment.

He writes:

Analysts are expecting the headline non-farm figure to shrink from 222k [new jobs] to 182k month-on-month, but with the unemployment rate falling back to 4.3%. Wage growth, meanwhile, is set to remain rather flaccid, with forecasts of a 0.3% increase in July compared to the 0.2% jump in June.

If accurate – and remember, those non-farm estimates have a tendency to be way off base – it could be another difficult day for the dollar, continuing the currency’s summer from hell.

Plus, of course, we could see more revelations around the Russia inquiry. Any suggestion that the situation is becoming more serious for the White House would probably spook the markets.

The US dollar is on track for its fourth weekly loss in a row, unless today’s jobs data is strong enough to spark a rally.

Bloomberg says:

The dollar index is headed for a fourth straight weekly decline after yesterday’s report that Special Counsel Robert Mueller is using a federal grand jury in Washington to help his probe into Russia’s alleged interference in the 2016 U.S. election and possible collusion.

Investors shouldn’t panic over the news that the UK government is reviewing Help to Buy, says Anthony Codling of Jeffries.

Codling reckons the scheme will simply be tweaked, to encourage more smaller homes to be built, rather than sunk altogether.

There is speculation in Property Week that the UK Government is seeking to scale back Help to Buy. Our view is that the Government will do nothing which could lead to a reduction in housebuilding volumes. We believe that around two thirds of Help to Buy sales did not need help to buy, rather homebuyers used the scheme to purchase a bigger home.

Focusing Help to Buy on First Time Buyers who need it is sensible, in our view.

Housebuilders may need to build more 3 bed homes and fewer 5 bed ones, but, in our view, such a change in density may lead to a rise rather than a fall in housebuilder returns.

There’s a subdued mood in Europe’s stock markets this morning, with the main indices broadly flat.

Investors seem to be keeping to the sidelines until the US jobs report has landed.

Europe’s major stock markets this morning
Europe’s major stock markets this morning Photograph: Thomson Reuters

Joshua Mahony, market analyst at IG, says:

The exuberance of yesterday appears to have been left behind this morning, with the FTSE retreating into a risk-conscious period of consolidation, given the unpredictability ahead of us.

UK housebuilders are having a particularly bad, following a report that the government could end its ‘Help To Buy’ scheme early.

Persimmon, Taylor Wimpey and Barratt Development are all down 3.5%, even though the government has denied that the scheme - which helps first-time buyers - is being wrapped up.

Updated

The US dollar continues to bob around a 15-month low, as traders get ready for the US jobs report in three hours time.

Concerns over the US political situation continues to weigh on the dollar. Commerzbank strategists explained to clients this morning that:

“It is becoming increasingly clear that the greenback is ...suffering as a result of President Trump’s weak government --the situation in the White House is simply too chaotic.

“That means any hopes that arose after the elections andresulted in a sharp rise in inflation expectations have sincebeen dashed.”

The drop in car sales last month shows that consumers are struggling, says Howard Archer, chief economist at the EY Item Club:

Sky News’s economics editor Ed Conway is also concerned:

Noble Francis, economics director of the Construction Products Association, fears that the slowdown in car sales could signal a wider weakness in the economy:

Car industry demands 'concrete' Brexit plan as sales fall again

Breaking! UK car sales fell over 9% in July, for the fourth month in a row.

The Society for Motor Manufacturers and Traders blamed Brexit uncertainty for the decline, and is urging the government to provide clarity over its plans.

According to the SMMT, 161,997 new cars were registered in the month as the market continues to fall. Car sales to businesses slumped by 23.8% year on year, while fleet sales were down 10% and registrations to private buyers fell by 6.8%.

UK car sales in July
UK car sales in July Photograph: SMMT

Mike Hawes, SMMT chief executive, says the auto industry desperately needs to know what Brexit deal Britain is aiming for:

The fall in consumer and business confidence is having a knock on effect on demand in the new car market and government must act quickly to provide concrete plans regarding Brexit.

Diesel sales declined by 20%, following the recent emission scandal, while sales of alternatively fuelled vehicles, such as electric cars, surged by almost 65%.

Hawes explains:

While it’s encouraging to see record achievements for alternatively fuelled vehicles, consumers considering other fuel types will have undoubtedly been affected by the uncertainty surrounding the government’s clean air plans.

Updated

Today’s dollar weakness is part of a broader trend.

The greenback has lost around 10% of its value since January, as optimism that Donald Trump might achieve tax reforms and infrastructure spending have faded.

This chart, from CNN, shows how the US currency has had a rocky ride as investors lost faith, or patience, with the president.

The US dollar since last November’s US election
The US dollar since last November’s US election Photograph: CNN

CNN says:

The “White House soap opera” has fueled the dollar’s decline, according to Kit Juckes, a macro strategist at Societe Generale.

“Confidence in the U.S. administration’s ability to deliver growth-boosting fiscal policies is at rock bottom,” Juckes wrote in a report this week.

More here:

Bank of England: Interest races could go up a bit

Ben Broadbent.

The UK economy is “a little bit” better placed to withstand a small rise in interest rates according to Ben Broadbent, the deputy governor of the Bank of England.

Broadbent has been speaking a day after the Bank’s Monetary Policy Committee left rates on hold at an all-time low of 0.25% and downgraded UK growth forecasts.

He told BBC Radio 5 Live:

“We have got to recognise that changes in interest rates take time. We can’t look just at what is happening now, we have to look at what might happen in the medium term.

“We think that the economy will continue to grow, we think that wage growth will pick up. I think there may be some possibility for interest rates to go up a little bit.”

Broadbent suggested there was light at the end of the tunnel for cash-strapped consumers, whose incomes are being squeezed as prices rise faster than wages:

“We think inflation will peak in the second half of this year. We expect... wage growth over the next three years.”

It’s a dark morning for staff at educational publisher Pearson, as it announces plans to cut another 3,000 jobs....

Back in the UK, Royal Bank of Scotland has revealed it is planning to create a new hub in Amsterdam, to help it cope with Brexit.

Shares in the taxpayer-owned bank have jumped by over 4% this morning, after it also announced it made a profit of almost £1bn in the last six month.

Maybe the worst of over for RBS (although a likely fine from US regulators over its conduct before the financial crisis still looms...)

The US dollar could weaken further today, if July’s American employment report fails to meet expectations.

FXTM Research Analyst Lukman Otunuga believes it will take something special to shake off the grand jury news.

It has been another rough and rocky trading week for the Greenback as heightened political jitters in Washington weighed heavily on the currency....

The distressed Dollar is in need of a lifeline and it may take an extreme upside surprise in both headline job numbers and earnings to bring the bulls back into the game.

US dollar weak after grand jury news

The US dollar is under pressure this morning, after it emerged that a grand jury has been convened to examine that Russia meddled in the US presidential election.

The dollar is languishing at a 15-month low this morning, and is close to its lowest level against the euro in over two years.

Reuters reports:

The dollar hovered near the 2-1/2-year-low against the euro touched earlier this week, pressured by signs that probes into possible Russian interference in the 2016 U.S. elections are gathering pace.

Mike Van Dulken of Accendo Markets says there is “unrelenting US dollar weakness” right now.

And Sireen Harajli, FX strategist at Mizuho in New York, says:

“(Political) policy uncertainty in the U.S. I think has been the biggest driver of declines in the dollar recently.

“Any positive effect from the election of President Trump I think at this point has been priced out.

The US dollar against a basket of currencies over the last five years
The US dollar against a basket of currencies over the last five years Photograph: Thomson Reuters

This comes after US media reported that special prosecutor Robert Mueller had set up the grand jury, as part of his inquiry into whether the Trump campaign colluded with the Kremlin.

President Trump hit back last night, telling his supporters that there was a plot to “cheat” them out of his leadership....

The agenda: It's US Jobs Day!

Good morning, and welcome to our rolling coverage of the world economy, the financial market, the eurozone and business.

America’s economy is in the spotlight today as we find out how many new jobs were created in the US last month.

July’s Non-Farm Payroll is expected to show that the US unemployment rate dipped back to 4.3% last month, with around 183,000 new jobs created.

The earnings figures will be closely watched too. They may show that wages rose by 0.3% during the month, up from June’s disappointing 0.2%.

Although the Non-Farm Payroll is frequently revised, it is a good insight into the health of the world’s largest economy.

President Donald Trump famously promised to be “the greatest jobs president that God ever created.” This might not be the first thing the history books remember him for, but today’s figures could show if he’s delivering on that pledge.

Eric Lascelles, chief economist at RBC Global Asset Management, expects a strong report:

“Our models point to an above-consensus gain of 200,000 or better in July. This aligns well with the quick job creation in June and other measures of labour market health that abound in the U.S.

However, we are aware that there is a slight undercurrent of decelerating job creation over the past few years that will probably extend on a trend basis into the future – a natural function of an aging cycle.”

The US economy created jobs steadily under president Obama’s watch, as this chart reminds us:

In the City, Royal Bank of Scotland, publishing group Pearson and theme park operator Merlin Entertainment are all reporting results.

The agenda

  • 7am BST: German factory orders for June
  • 9am BST: New UK car registration figures for July
  • 1.30pm BST: US Non-Farm Payroll jobs report
  • 6pm BST: The Baker Hughes weekly count of US oil rigs

Updated

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