U.S. job growth was reported to increase strongly in July driven by demand for workers in the services sector. This carries an indication that the economy is still maintaining momentum in the beginning of the third quarter.
NFP data recorded a significant increase of 943,000 jobs last month after an increase of 938,000 in June, based on a report by the Department of Labor released just now. The reading also far surpassed the forecasts of economists who predicted NFP data would rise by 870,000 workers.
On the other hand, the unemployment rate fell to 5.4% from 5.9% in July. Economist Sam Bullard opined that labor market conditions looked healthy at the beginning of the third quarter as labor -intensive services businesses continued to take on workers following high demand.
Bullar added that at the same time, the expansion of summer school programs in several districts also led to an increase in employment in the education sector.
A different report that also boosted market sentiment was that the economy had fully recovered for the second quarter from the economic downturn due to the pandemic outbreak. Analysts expect economic growth this year to reach around 7%, the fastest reading since 1984.
On the other hand, economist James McCann noted that a strong jobs report in the next few months will give the Fed the green light to make an early announcement of policy tightening.
So far what has been a market concern is the increase in Covid-19 infection, which is driven by the Delta variant of Covid-19 that will increase the risk. Although the impact on economic activity is likely to be low, with almost half of the population being fully vaccinated but increasing cases will encourage work from home and prevent hiring.
The US dollar index strengthened 0.23% against major currencies to a trading level of 92.468.
