Another Weak US Employment Data Confirms Powell, USD Lower

FED's Powell put emphasis on US employment yesterday and today saw the release of another disappointing employment report.

Skerdian Meta•Thursday, August 1, 2024•2 min read

FED’s Powell put emphasis on US employment yesterday and today saw the release of another disappointing employment report, prompting the market to speculate about the September rate cut, on further potential weakness in the labor market. U.S. 10-year Treasury yields continued to decline, reflecting concerns over economic conditions. Initial jobless claims in the U.S. rose to the highest level in almost a year, following weak ADP jobs data from the previous day, which have brought USD sellers back in the game.

Weekly US Initial Jobless and Continuing Claims

Initial Jobless Claims:
- Reported at 249K, higher than the 236K estimate
- Previous week revised to 235K
- Current level is the highest since the same time last year
- 4-week moving average is 238K, up from 235.5K the previous week
Continuing Claims:
- Reported at 1.877M, above the 1.856M estimate
- Previous week’s continuing claims revised to 1.844M from 1.851M
- 4-week moving average is 1.857M, slightly up from 1.852M the previous week

Market Reactions and Fed Speculations

The bond market has shown signs of vulnerability, with the U.S. 2-year yield dropping to 4.24%, down 9 basis points from the previous day. This decrease is significant, as it places the yield a full percentage point below the lower end of the Federal Reserve’s current target range of 5.25–5.50%.

The Fed funds market is almost certain for a 25 bps cut in September, and now prices in a 13.5% chance of a 50 basis point rate cut next month. Comments from Federal Reserve Chair Jerome Powell, stating that they are prepared to respond if the labor market were to weaken, which is happening and they will have to admit that. The USD has been retreating in the US session as a result of the softer employment data, as well as the softer ISM manufacturing report.

US Preliminary Labour Cots and Productivity Data

Q2 Unit Labor Costs:
- Increased by 0.9%, below the expected 1.8%
- Previous quarter’s growth revised from 4.0% to 3.8%
Q2 Productivity:
- Rose by 2.3%, exceeding the expected 1.7%
- Previous quarter’s productivity growth revised from 0.2% to 0.4%

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Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.

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