Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail client accounts lose money when trading CFDs.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
ATFX

FCA License No: 760555

ATFX-search-icon
Client Portal
Start trading
rch

The US Employment Sector Is Starting To Show Cracks

The market ushered in the last trading week of August after last week's Jackson Hole symposium. The US non-agricultural jobs report will kick off the September trading month. The market expects the growth of non-farm payrolls to slow down by half in August, from a five-month high of 528,000 to 290,000. The unemployment rate is expected to remain at 3.5%, and the average hourly wage rate is expected to fall from 0.5% to 0.3%.

The US employment picture was robust in the year's first six months. However, while the country has not yet reached its maximum employment level, a labour shortage persists, with job vacancies nearly double the number of unemployed job seekers. Nevertheless, US employment hit a record high of about 153 million persons in July, and the unemployment rate remains at its lowest level in half a century.

Average hourly earnings rose 5.2% in the year to June, about two percentage points higher than the pre-pandemic pace. However, the pace of growth is only slightly slower than earlier in 2022, suggesting that it will take some time before wage growth returns to previous levels.

Employment is expected to decline in August.

However, the labour market trend may start to weaken gradually. As the US economy contracts, companies are more cautious in their expansion and recruitment efforts. Major companies, including Wayfair, Apple, and Walmart, have recently announced layoffs.

If the non-farm employment growth slows down this week, it will verify market concerns about the US economic outlook. The dollar was trading close to a five-week high last week and may re-adjust downwards. The resistance posed by the double top on the daily chart this week does not rule out the dollar index hitting the 107 mark or falling further to seek support at 106.26.

On the other hand, the slowdown in employment conditions could be a strong motivator for the Federal Reserve to slow down interest rate hikes, which may trigger a rally in the stock market. As a result, the Dow recently accelerated its decline from its April highs, with 32,600 acting as its next support level.

Equities and fixed-income products recently staged their worst collective sell-off starting in June after spending most of the previous two months in an uptrend. Meanwhile, 10-year US Treasury yields remained above 3% for the majority of last week, as the market expected the Federal Reserve to maintain its aggressive rate hike pace.

A possible slowdown of interest rate hikes

Furthermore, starting this week (September 1), the Fed is about to accelerate the implementation of its quantitative tightening (QT) plan, which will increase the scale of the monthly balance sheet reduction to 90 billion US dollars. As a measure to further tighten monetary policy, US bond yields tend to rise by shrinking its balance sheet, and US stocks will naturally encounter some resistance.

An uptrend in US stocks will likely be affected by the current economy. As the Federal Reserve continues its most aggressive interest rate hike cycle in decades, the safe-haven status of US government bonds has been shaken. Hence, 2022 is expected to be the most volatile year for government bond yields in over ten years, which indirectly affects the US dollar and US stocks as they oscillate together.

Last Updated: 29/08/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

Recent news

Recent news
GBPJPY Primed for Further Losses

The GBPJPY pair dropped sharply last week after Japanese intervention and UK monetary poli...

Recent news
Hong Kong Stocks Exceed Critical Support Level

Hong Kong’s stock index faces a crucial week or two after the price was dragged through a ...

Recent news
Bank of Japan Intervenes in the Japanese Yen (¥)

The Bank of Japan sent out some threatening comments last week that signalled a potential ...

Recent news
Euro Might Be Queued Next For Currency War Gains

If the Bank of Japan has marked the start of currency wars, then the EURCHF is worth watch...

Recent news
Economic Concerns Over Global Release of National PMIs

Following the announcement of interest rate decisions by the Federal Reserve and the Bank ...