Friday’s US labour market report for July provided further evidence of a strong recovery in the jobs market. Total nonfarm employment increased by 943K, the largest monthly increase since August 2020. Figures for the two previous months were revised upwards, giving a very robust three-month average rise of 832K, although employment remains 5.7 million below its pre-pandemic level. The largest driver of job gains was ‘Leisure & Hospitality’. The unemployment rate fell five-tenths to 5.4% — its lowest since March 2020.
US GDP surpassed its pre-COVID-19 level in Q2 and with policy extraordinarily easy and inflation currently very elevated, Federal Reserve officials have begun discussing the potential timing of some removal of policy accommodation. Strong labour market reports over coming months will strengthen the case for such a move. Investors will watch the upcoming Jackson Hole Symposium for further clues on the Fed’s latest thinking, however, Fathom believes the FOMC is at risk of being increasingly behind the curve in its policy tightening.
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