Monex: Higher US unemployment rate dampens effect of higher job growth

Monex: Higher US unemployment rate dampens effect of higher job growth

July 2, 2021

Economy
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This is a commentary by Ima Sammani, FX Market Analyst at Monex Europe, on this afternoon's US labor market data.

At face value, the upwards surprise to June’s net employment data and the revision higher in May’s employment data are positive for the US labour market. Given these developments, one would expect the dollar to firm as the US economy adds jobs at a faster rate, however, the higher net employment data didn’t translate into a faster recovery in the labour market - which is essential under the Fed’s criteria for normalising policy.

The US economy added 850,000 jobs in June and 583,00 in May, and yet the unemployment rate remains stable at 5.9%, while the number of unemployed persons was little changed at 9.5m in June. The lack of movement in the unemployment figures stifled the impact the net employment data had, as it doesn’t map over into emboldening calls for earlier rate hikes and higher US yields.

The June employment data thus resulted in a weakening of the US dollar and a moderation in front-end Treasury yields.

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