US Jobs Report to Highlight Pace of Recovery, Futures Steady

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Key Takeaways

• Jobs and unemployment data to reveal how the economy fared in July
• Analysts expect the upward momentum to continue, signaling a healing economy

US Jobs Report to Highlight Pace of Recovery

Ahead of Friday’s highly-anticipated nonfarm payrolls report, traders and investors are maintaining their optimism in keeping stock futures unchanged, swinging from minor losses to minor gains. The closely-watched jobs data, scheduled for release one hour before the regular session kicks off, promises to bring increased volatility across financial markets, from stocks to currencies, commodities, and government bonds.

Analysts predict the US economy would have expanded by about 870,000 new hirings for July. The forecasted job figure would top the previous blockbuster report for June when the labor market added 850,000 new workers.

Besides the nonfarm payrolls data, market participants will also be looking to find out whether the other key gauge of economic health, the unemployment rate, would have improved over the last month. Economists expect the unemployment rate to drop to 5.7%, down from 5.9% in June.

The two sets of economic updates would be crucial for the state of the US economy as they would either solidify or dampen the Fed’s intention to cut back its $120bn in monthly asset purchases, which have fueled the stock market rally and supported the economy for over a year.

Markets in Mildly Positive Stance

A strong jobs print could be expected to further tilt the Federal Reserve into discussing when it might begin to reduce its bond-buying scheme. It could also prompt the US central bank to bring forward the timeline for an interest rate hike to prevent the economy from overheating.

Keeping unemployment in check is one of the two main goals of the Fed, along with controlling inflation. A healthy unemployment rate, also regarded as maximum employment, according to Fed Vice Chairman Richard Clarida’s comments earlier in the week, is considered a level at or below 3.8%.

While the US unemployment has made considerable progress over the past months, coming down from an April 2020 peak of 14.8%, there are still about 7.6 million fewer Americans employed, compared with pre-pandemic months when the unemployment rate stood at 3.5% to 4.0%.

On the other hand, disappointing jobs and unemployment data could suggest the economy still has room to grow and it would be premature for the Federal Reserve to decide to taper at a relatively early stage of the economic recovery cycle.

As the market waits to see the latest jobs report, stock index futures are hovering near the flatline. Dow futures and S&P500 futures are mildly in positive territory, while Nasdaq futures are negative by less than 0.1% in pre-market action.

The US dollar has advanced against the euro, the Swiss franc, and the Japanese yen, while gold has dropped below the $1,800 milestone.

European Markets Update

In Europe today, major bourses are trading in the green, with the Stoxx 600 Europe drifting near unchanged levels. The pan-continental benchmark had closed the last four market sessions with a peak every following day, boosted by strong earnings reports.

Digital assets are moderately lower on Friday after a strong performance a day earlier. Both bitcoin and ether pushed higher on Thursday, gaining 3% and 3.5%, respectively. Bitcoin is currently trading near $40,500, while ether gyrates near $2,750.