The US unemployment rate surged to a nearly 3-year high of 4.3% in July amid a significant slowdown in hiring, reinforcing fears of a deterioration in the labor market and the economy's potential vulnerability to a recession.
The Labor Department's Bureau of Labor Statistics reported a 114,000 increase in nonfarm payrolls last month. That's well below the 215,000 jobs a month added over the past 12 months and even less than the 200,000 that economists say are needed to keep up with population growth considering the recent surge in immigration.
Economists polled by Reuters had forecast a 175,000 increase in jobs. The survey of establishments from which the payroll data are taken also showed that the economy created 29,000 fewer jobs in May and June than previously reported.
A rise from a 50-year low of 3.4% set in April 2023 to the highest level since September 2021 almost guarantees an interest rate cut by the Federal Reserve (Fed) in September, with economists calling for a 50-basis-point cut in borrowing costs. They believe the US central bank is likely behind schedule in easing monetary policy.
A sharp slowdown in the labor market has already been noted in recent sentiment surveys and through an increase in the number of citizens receiving unemployment benefits. Fed rate hikes in 2022 and 2023 have put pressure on labor demand, and this week's government data showed that hiring in June was the lowest in four years.
The jobs report, which also showed that annual wage growth last month was the smallest in three years, prompted some Wall Street institutions, including Bank of America Securities, to move their expectations for a rate cut from December to September. Goldman Sachs now expects three rate cuts this year instead of two.
Such estimates and sentiments are likely to push EURUSD even higher.
From a technical point of view, EURUSD may break through the current resistance and rally towards 1.1000.
The overall recommendation is to buy EURUSD.
Profits should be taken at the level of 1.1000. A Stop-Loss could be set at the level of 1.0870.
The possible loss should not exceed 2% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
