Wage growth for July indicates better than expected state of US labour market
The data on earnings growth and job creation in July, published on Friday by the US Department of Labour, beat analysts’ estimates on both figures of average hourly earnings and indicators of job creation. This suggests that the US labour market is in a better current position than previously projected.
Wages are growing faster than expected
Average hourly earnings grew by 0.3% between June and July, up 0.2% from earnings growth between May and June. The figure beats estimates by 0.1%.
The year on year indicator for wage growth met analysts’ expectations at 2.6%, the same level seen the previous month, with the figure for average weekly work hours coming in at 34.5, up 0.1 per hour from last month and analysts’ estimates.
255,00 new jobs created in non-agricultural business
Most surprisingly, the number of new jobs created in all non-agricultural business stood at 255,000 in July, down only 37,000 from June’s figure and 75,000 higher than previously predicted.
Slight disappointment only came from the unemployment rate, which remained at 4.9% in July rather than seeing the 0.1% decrease predicted by analysts.
USD rallies against major currencies
The USD rallied against other major currencies in anticipation of the data release and continued its hike after the positive results at1.30pm.
The USD/JPY gained 0.84031 between 1.20pm and 2.47pm. At 2.57pm the pair was trading at 101.85954.
US Stock markets rally
The Dow Jones Index gained 0.85% in early morning trading on the back of positive labour market data, standing at 18,507.85 at3.21pm.
The S&P 500 Index was up 0.69%, to 2,179.23 and the NASDAQ composite index recorded a 1.03% jump.
Traded commodity prices drop on positive US labour data
Silver and Gold prices were down as the positive data rallies interest in higher risk, interest earning assets.
Gold dropped 1.54% between 1.20pm and 3.14pm, to trade at 1339.73USD/ounce.
Impact on future Fed decisions
The better than expected data also refuelled the debate about the possibility of a Fed rate hike in the meeting next month. As expected, the Fed refrained from increasing the interest rate in its meeting in July, but indicated that an increase may still be on the cards later this year.
The next Fed monetary policy meeting will take place from the 20th to the 21st September. Today CME Group’s Fed Watch Tool indicates a 20% possibility of a rate increase at the next meeting, up from 9% likelihood the previous day.
Most analysts still believe that the Fed will hold off on a rate hike until its December meeting.