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US labour market shows strength

The US economy added 187,000 jobs in July while the unemployment rate declined to a low 3.5%, data released Friday showed. Equity markets looked as if they were about to finish the week strong after the labour data, but gains were erased late in the session.

Shane Strowmatt, LGT
Tempo di lettura
5 minuto
US workers
© Shutterstock

The US Labor Department data showed that the unemployment rate was falling and wages were still growing, up 0.4% in July when compared with June or 4.4% higher than the same month a year ago. A total of 1.6 job openings per unemployed person are available in the US economy. Some investors see the resilience of the US labour market as a sign the world’s largest economy could pull off a soft-landing scenario, which entails only a moderate economic downturn as the US Federal Reserve (Fed) approaches the end of its fastest hiking cycle in decades. The strength of Friday’s labour data led some investors to the conclusion that the Fed may have room to continue its hiking cycle. The dollar index saw its biggest single-day drop in three weeks after the data came out but was slightly higher again on Monday.

In New York, stock indices fell in late trading after posting solid gains earlier in Friday’s session. At the start of the new week, markets were already looking ahead to Thursday’s US inflation data for signals about the Fed’s next steps. Investors expect core inflation to come in around 4.7%. On Friday, the Dow Jones Industrial ended the day down 0.43% to finish the week at 35,065.62 points and the S&P 500 lost 0.53%, closing at 4,478.03 points. The Nasdaq-100 dropped 0.51% to 14,274.92 points.

In Asia, stock markets were mostly down as traders awaited the US inflation data later in the week as well as Chinese trade balance and inflation data due on Tuesday and Wednesday, respectively. The macroeconomic data coming out of China will be studied for signals about the strength of the country’s economic recovery and whether the government could step in with more support. Hong Kong's Hang Seng Index was trading down 0.2% on Monday, while the Shanghai Composite lost 0.8 % in early trading. In Tokyo, the Nikkei 225 was trading roughly flat and South Korea’s Kospi was down 0.7%. In Australia, the S&P/ASX 200 was trading 0.3% lower.

Switzerland’s employment data released at the end of last week looked less rosy but still strong. Switzerland’s KOF Employment Indicator is falling during the third quarter of the year but remains in positive territory. The indicator came in at 10.5 point for the third quarter. It has been slowly falling since the second quarter of 2022 but is still ahead of its long-term average of 1.0 points. The banking, wholesale and manufacturing sectors showed poor outlooks and are likely to reduce staff in the coming months.

Over the weekend, Daimler Truck Chief Financial Officer Jochen Goetz died in an accident, according to a statement from the company.

Corporate news in focus: Q3 figures from Siemens Energy.

Economic data in focus: Swiss unemployment rate (07:45 CET), German industrial production (08:00), Swiss foreign currency reserves (09:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.