Economists not convicned about jobs numbers

Another better than normal jobs number is forecast, but will it be enough to alleviate recession fears?

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It's more than a positive number

Normally, an NFP above 200K would be seen as a positive number and might put some wind in the sails of the market. The consensus for July is for an addition of 250K jobs, down from the 372K reported in June. Yet, this exceedingly good result doesnt seem to reassure the markets or economists, for two reasons:

1) The Fed is fully focused on inflation, so changes in monthly job numbers dont move the needle in terms of monetary policy;

2) Labor force participation is still well below pre-pandemic levels, and although there has been some recovery since the vaccines were rolled out, it's still on par with levels of the
early 80s. And the forecast is that the participation rate will stay at 62.2%.

Getting a handle on the numbers

The unemployment rate is expected to once again stay at 3.6%, a remarkable feat, considering how many jobs have been created. That begs the question of whether inflation can normalize without pushing unemployment up substantially. The Petersons Institute for International Economics (PIIE) argues it’s unlikely.

The BLS in its latest report showed that there were still 10.7 million jobs open, with churn rates near record highs at 4.2 million. Meanwhile, only 5.9 million people were looking for a job, relatively unchanged from the prior month. June saw a reduction of 605K jobs, but only 372K people were hired. With the economy fully open, the total number of workers is still below the pre-pandemic level.

Jobseekers can still readily find jobs might be reassuring, but the average hourly wages are still forecast to remain below inflation levels. Even if workers manage to get a better salary by changing jobs, they still end up with less purchasing power. And in the end, the more than the number of people working, how much people can spend might be the key to how the economy goes.

Euro bulls attempt at 50SMA

EURUSD maintained an upside bias over the last few sessions but met resistance at $1.0294, shy off the 50-day average at $1.0325 and the round $1.0300. The upward leg off the April median regression channel near $1.0150 acted as support, offering the false breakout above the range high of $1.0220, but it has essentially printed a double top formation.

Losing $1.0095 would expose $0.9952 to bears again, but breaking past the range top and $1.0340, would open up the door to $1.0615. Breaking outside the channel top could put an end to the bearish trend if a potential pullback stops and reverses back up at or above it.

Key Takeaways

The job market is doing well, but inflation and labor force participation arent letting economists put any faith in the numbers. The unemployment rate is low, but the number of people unemployed is higher than it was before the recession. Also, wages are stagnating because inflation is higher than wage growth, which adds a pessimist’s view to the economic outlook.