British pound hits pre-pandemic high against euro

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The sharp increase in new jobs in the United States suggests that the economic recovery is not slowing down as much as many feared. While this is good news of course, it could put pressure on the Federal Reserve to cut stimulus sooner than expected.

This is something the markets would not like, having benefited from the increased liquidity during the pandemic.

My colleague Louis ashworth writing :

The United States regained 943,000 jobs in July in the largest monthly increase in nearly a year, as the world’s largest economy maintained its reopening momentum.

The change in the non-farm payroll landed 73,000 above expectations and was accompanied by upward revisions for the June and May figures.

According to the Bureau for Labor Statistics, the private sector accounted for 703,000 jobs, more than half of which were in the leisure and hospitality sectors. Government jobs accounted for 240,000.

He lowered the unemployment rate in the United States from 5.9% to 5.4%, almost 10 percentage points lower than the peak of 14.8% reached last April.

Reading the right note will build confidence among Federal Reserve officials that they can begin to withdraw monetary policy support from the US economy in the months to come.

Last week, the central bank said it would maintain its $ 120 billion monthly bond purchase program until more “substantial” progress is made in restoring jobs and inflation control.

Andrew Hunter, senior US economist at consultant Capital Economics, said the start of a slowdown in the Fed’s quantitative easing could now start sooner than expected.

“We believed that the slow and continued progress in the employment recovery would see the Fed delay its asset purchases until early next year,” he said.

“But with board members Richard Clarida and Christopher Waller both recently suggesting that stronger job growth would be enough to hit the ‘substantial further progress’ threshold, the risks may now be linked. to this process starting earlier than expected. “

It could also make it harder for Joe Biden, who has faced calls within the Democratic Party to curb spending, push forward with stimulus efforts, including a $ 550 billion infrastructure bill that will be voted by senators this weekend.

About 147 million Americans were working in July, about 5.5m below the pre-pandemic peak. 6.5 million more were actively looking for work, with the number increasing for the first time since December.

Wage growth was stronger than expected, with average hourly earnings up 4% year-on-year from an expected increase of 3.8%.

The survey data was reportedly mostly collected in the first half of July, ahead of the growing peak in Covid-19 driven by the Delta variant that the United States is currently experiencing.


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