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The Nonfarm Payrolls report is expected to show that the US economy added 175,000 jobs in July, following a better-than-expected gain of 206,000 in June.
The Unemployment Rate is likely to stay unchanged at 4.1% in the same period. Meanwhile, a closely-watched measure of wage inflation, Average Hourly Earnings, is seen rising by 3.7% in the year through July after reporting a 3.9% increase in June.
The US labor market report is more significant this time around, especially after the Fed tweaked its July policy statement to mention that it is “attentive to the risks to both sides of its dual mandate”, rather than previously only noting its attention to inflation risks.
On Wednesday, the Fed kept the fed funds rate at 5.25% to 5.5%, acknowledging “some further progress” toward its 2% inflation goal.
During the press conference, Fed’s Chair Jerome Powell said that “the broad sense of the committee is that the economy is moving closer to the point at which it would be appropriate to reduce our policy rate,” cementing an interest rate cut in September.
On the employment front, Powell said indicators show the job market has gradually normalized from “overheated” conditions. Although he tried to be rather cautious with his message, his take on inflation and employment only made markets believe that another rate cut could be on the table this year beyond September.
Meanwhile, the US private sector saw an employment gain of 122,000 in July after advancing by an upwardly revised 155,000 in June, the ADP National Employment Report showed on Wednesday. The data missed the market expectations of 150,000 in the reported period. Additionally, the BLS reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday that the number of job openings on the last business day of June stood at 8.184 million, against the 8.03 million expected.
Previewing the July employment situation report, TD Securities analysts said: “We look for July payrolls to move largely sideways vs June, printing 200k at the start of Q3. High-frequency data suggest employment growth has continued to hold up. Separately, the UE rate likely stayed unchanged at 4.1%, but the risk is that it drops back to 4.0% after its recent gains.”
“We also look for wage growth to cool by a tenth to 0.2% m/m, and down to 3.6% YoY,” the analysts added.
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