From our colleagues at our sister company, Argent Trust:
Announced this morning, the economy added 528,000 jobs in July, much higher than expected and the previous month was also revised higher. The Education and Health Services industry remained strong, while the Motor Vehicles and Parts industry was weak. The Unemployment Rate ticked one tenth lower to 3.5% while the Labor Force Participation Rate at 62.1% is slightly lower than the previous month. Average Hourly Earnings increased 5.2% on an annual basis, higher than expected and Average Weekly Hours were 34.6 which held steady from last month’s revised figure.
Overall, a stunningly strong headline jobs report coupled with a lower unemployment rate. Average hourly earnings is still above 5% on an annual basis, which is well above the 4% historical average; however, the participation rate remains low as the labor market works through the post pandemic period. Given this data, the Federal Reserve should remain focused on tightening financial conditions through interest rate increases and reducing their balance sheet. However, some companies are beginning to announce workforce reductions in recent earnings reports; a sign that the labor market could see some turbulence in the coming months, but this has yet to filter through to the monthly jobs data. The Federal Reserve will be closely monitoring the health of the labor market as a key input in their assessment of the overall economy in the months ahead.
Following the release of the jobs report, U.S. 10-year treasury yield ticks higher and equity futures move lower as we head into the market open.
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