Welcome to your weekly macroeconomic round-up, where we spotlight a few of the most significant events in the last week.
US added 940,000 jobs in July, better than expected
Non-farm payrolls data showed that the US economy added 943,000 jobs in July as the unemployment rate dropped to 5.4%. This was nearly 100,000 more jobs than expected. Wage data was also encouraging, indicating that average hourly earnings increased by 4% on the same month a year ago.
Once again, despite rising COVID-19 case numbers in the US, the leisure and hospitality sector led job creation statistics. The sector, having been worst affected by social distancing restrictions last year, has been resurgent in recent months as vaccinations have led to a roll back of measures.
The market reaction was positive on the news with US Treasury yields rising to above 1.3% and US equity markets testing new record highs.
Bank of England members vote to maintain QE purchases at £895bn
The central bank monetary policy committee voted 7 – 1 in favour of leaving the level of central bank asset purchases unchanged at £895bn. There had been some expectation that there would be more support for reducing the quantity of asset purchases, given the recent hawkish rhetoric from some members.
As mentioned, the positive US jobs report fed through into falling US Treasury yields as market participants inferred that the Federal Reserve is making progress towards its goal of full employment. Moreover, a positive outlook on the US economy also fed through into US equities making record highs as well as a rebound in the price of the US dollar, which had retraced slightly over the week prior. Strong domestic data and an appreciating currency, coupled with expectations that inflation should be at a manageable level over the medium term, was less supportive for the price of gold, which has fallen nearly 5% since the jobs data was reported.
Look out for next week’s update, where we’ll be focusing on US inflation and UK GDP.
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