The jobs report in the United States is considered one of the most important economic data issued monthly, and it has a significant impact on financial markets and monetary policy trends. Here is the importance of the jobs report in measuring the health of the US economy and guiding monetary policies:
1. An indicator of the health of the labor market: The jobs report is a leading indicator of the health of the labor market in the United States. It provides data on the number of jobs created or lost during the previous month, as well as the unemployment rate and labor force participation rate. This information helps estimate the extent of the economy’s activity and stability.
2. Monetary policy guidance: The Federal Reserve uses the jobs report as one of the main inputs for determining appropriate monetary policies. When data indicate an improvement in the labor market and employment rates rise, the Council may consider raising interest rates to reduce inflation. On the other hand, if the data show weakness in the labor market, the Council may consider adopting monetary easing policies to promote economic growth and job creation.
3. Guiding general economic policies: In addition to its influence on monetary policy, the jobs report provides important information that helps politicians and decision makers understand the performance of the economy and guide general economic policies, such as employment, training, and social security policies. The jobs report in the United States is considered one of the most important economic indicators that provides vital information about the health of the labor market
4. The market’s reception of the numbers included in the reports: Stock market: Impact of positive numbers: If the numbers in the jobs report exceed expectations and show strong job growth and a decrease in the unemployment rate
A price looks at the US Dollar Index showing its movements in recent days:
-Today: The US dollar index fell by approximately 0.1% to the level of 105.03 points, compared to the opening level of 105.10 points. It recorded its highest level today at 105.20 points.
– Friday trading: The index ended Friday trading down by 0.25%, recording its lowest level in three weeks at 104.52 points, due to US labor market data that came below expectations.
-Last week, the US dollar index witnessed a loss of 0.95% during the past week, which is the second weekly loss in a row, and the largest weekly loss since early last March, due to the decline in US yields after the Federal Reserve meeting, which was less aggressive.
These movements reflect the impact of economic and political factors on the value of the US dollar, and indicate recent trends in the global currency market.
The 10-year US Treasury yield fell more than 0.6 percentage points on Monday, extending losses for the fourth straight session, and reaching a three-week low of 4.455%. This development is considered an indication of the lack of investment opportunities in the US dollar.
This move in the US bond market comes after the release of US jobs data for April, which came in below expectations. This weak data has reduced pressure on the Federal Reserve, meaning there is less chance of raising interest rates in the near future.
These movements in bond markets reflect the market’s interaction with economic and political events, and affect the value of the US dollar and investment trends in it.
The Federal Reserve kept interest rates steady at the conclusion of its monetary policy meeting last week, a decision that was expected by the market. However, the Council has indicated that it is leaning towards additional interest rate cuts in the future
Monthly jobs report in the United States
This trend towards a more accommodative monetary policy reflects the Council’s commitment to supporting the American economy and promoting economic growth, especially in light of the current economic challenges associated with the Covid-19 pandemic and its effects on the labor market and the economy in general.
These signals made by the Federal Reserve influence market expectations regarding interest trends, and shed light on the future outlook for US monetary policy.
The monthly jobs report in the United States showed the addition of a limited number of jobs in non-agricultural sectors during the month of April, amounting to about 175 thousand jobs, a number lower than market expectations that expected the addition of about 238 thousand jobs. We should also note that this number is well below the large increase in jobs seen in March, which rose by 315,000 jobs compared to 303,000 in the previous edition.
Also of concern is the unemployment rate rising to 3.9% in April, compared to 3.8% in March, a level worse than market expectations of 3.8%. The increase in hourly earnings in April also slowed to 0.2% compared to a 0.3% increase in March, which was also below market expectations of a 0.3% increase. These numbers reflect a slowdown in the growth of the American labor market compared to previous performance, and cast doubts about the stability of the economy and its recovery from the repercussions of the Covid-19 pandemic.
Following the release of the economic data, the Chicago Mercantile Exchange’s Fed Watch tool saw a rise in futures pricing on the possibility of a US interest rate cut in coming months. According to the tool, odds of a cut rose by about 25 basis points next June from 14% to 20%, in July from 35% to 45%, and in September they reached 67%.
Market expectations of interest rate movement
In terms of market expectations for interest rate movement, investors are currently pricing in two cuts of around 50 basis points in the federal funds rate this year, anticipating them to occur in September and November. Pricing before the jobs report was for a single cut of about 25 basis points.
These forecasts reflect investors’ movements and response to current economic data and developments in monetary policy, providing important signals regarding market trends in the near future. Expectations about the performance of the US dollar vary and depend on several factors, including economic and geopolitical events. Here are some expectations about the performance of the US dollar:
1. Continued negative movement: Many analysts and economic sites expect the US dollar to continue moving in the negative zone against a basket of major and minor currencies. This could be a result of monetary easing measures taken by the United States, as well as other factors such as inflation levels and global monetary policy.
2. Exacerbation of geopolitical tensions: The exacerbation of geopolitical tensions in the Middle East region may once again increase the activity of buying the US dollar as a safe haven. The US dollar is usually seen as one of the major safe haven currencies during periods of geopolitical stress.
3. Monetary policy moves: The Federal Reserve’s decisions on interest rates and monetary easing policies can significantly affect the performance of the US dollar. Developments in these areas may affect market expectations regarding the strength or weakness of the dollar. The movement of the US dollar remains the subject of continuous analysis for analysts and investors, and its expectations depend on the interaction of many economic and geopolitical factors in the international arena.
