Friday, August 6 is a big day for the financial markets. Though the week started off rather slowly, it will end with some of the most important data for investors, specifically reports about the US labor market.
The markets are not quite sure what to expect at the moment. Earlier this week, the ADP jobs report, which usually sets the stage for NFPs, was almost twice below the forecast, disappointing investors. However, yesterday’s jobless claims data wasn’t particularly worrying. Yes, initial jobless claims were slightly higher than expected, but the 4-week average was in line with the forecasts and continuing claims were lower than predicted.
As a result, today the markets are a bit unsure whether the non-farm payrolls in July will meet the forecast of 870,000. The NFP report disappointed in April and May, but was better in June and many hope that the positive trend will have extended into July, but the ADP report is casting some doubts.
In addition to the NFP data, the United States will also publish the official unemployment rate for July and earnings data today, rounding off a week of employment statistics.
Though US labor market reports will dominate the markets today, it is important to note that its northern neighbor Canada is also going to publish its employment change and unemployment rate reports for July today at the same time.
Update: The reports are in. Canada disappointed on both counts, but the United States delivered better than expected labor data. Non-farm payrolls in July climbed to 943K against a forecast of 870K, while the unemployment rate fell to 5.4% against a prediction of 5.7%. Private NFPs and all wage data was also overwhelmingly positive.
These results are going to boost the US dollar and heighten hopes of an early tapering of bond purchases by the Federal Reserve, giving investors something to look forward to at the next Fed meeting.
US stock indices today might be a bit more subdued because positive labor and inflation data is going to require that the Fed pumps less stimulus funds into the economy, which tends to lead to weaker stock performance.
