James Trescothick

Education Manager at easyMarkets. Passionate about the markets, the excitement, the story driving the markets at the time, the fundamentals and even the technicals.

On Friday a robust NFP (nonfarm payrolls) report eased fears of a broad slowdown in the world’s largest economy, and helped U.S. stocks and the US dollar spike.

June NPF Report Better than Expected

The U.S. economy added a more than expected 222,000 nonfarm jobs last month, following an upwardly revised gain of 152,000 the previous month that was originally reported as 138,000, the Labor Department said. Economists in a Bloomberg survey called for a monthly gain of 178,000. The June total was the second-highest of the year.

Unemployment edged up to 4.4% from 4.3% as more workers entered the labour market. Workforce participation ticked up to 62.8% from 62.7%.

Despite the gains, average hourly earnings rose just 2.5% annually, unchanged from the previous month. Analysts expected earnings to reflect a 2.6% annualized gain.

The official data came in much stronger than an earlier estimate provided by payrolls processor ADP Inc., which showed the creation of 158,000 private-sector jobs for the month of June.

NFP Report Effect on the Market

Wall Street reacted positively to the nonfarm payrolls data, as investors reaffirmed their positive outlook on the U.S. economy after a series of dismal economic reports. The large-cap S&P 500 Index rose 0.6% on Friday and broke even for the week. Most of the S&P 500’s main sectors finished in positive territory.[1]

The blue-chip Dow Jones Industrial Average closed up 0.4% and finished higher for the week. The technology-heavy Nasdaq Composite climbed 1%.

On the currency front, the U.S. dollar rose against a basket of peers. The dollar index (DXY) advanced 0.2% to close at 96.01 on Friday. The euro and pound declined as a result.

More Data Releases Ahead in the Week

A robust labour market continues to underlie the U.S. economy, but disappointing wage gains have raised worries about a lack of inflation. This has put some members of the Federal Open Market Committee (FOMC) on high alert, according to the minutes of the June policy meeting. Policymakers continue to expect three rate hikes for the year, according to the minutes last month’s meeting. Fed Fund futures prices, which have long been used to express the market’s expectations of U.S. monetary policy, imply a nearly 58% probability of liftoff in December.[2]

Investors can expect an active second-half of the week in terms of U.S. data releases. On Thursday, the Labor Department will release the producer price index (PPI), a measure of inflation at the factory-gate level. On Friday, the Labor Department will release the monthly consumer price index (CPI), the most closely-watched measure of consumer inflation. Separately, the Commerce Department will issue its latest retail sales figures.

[1] Sam Bourgi (7 July 2017). “S&P 500 Futures Rebound Along With Dollar as Nonfarm Payrolls Beat.” Economic Calendar.

[2] CME Group. CME FedWatch Tool.

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