The US Bureau of Labor Statistics released the monthly payrolls report for August. Coming off the recent private sector hiring published by the ADP, the markets were slightly disappointing.
According to official data, nonfarm payrolls rose 156,000 on a seasonally adjusted basis. This was below consensus estimates of 180,000. Past revisions for June and July saw the payroll numbers being revised down by a net 41,000.
The unemployment rate which was projected to remain steady at 4.4% also ticked higher to 4.4%. The average hourly earnings also came out soft, rising just 0.2% on the month and putting the year over year wage growth at a steady 2.5%.
The payrolls report for August did not account for the disruptions caused by hurricane Harvey but economists already point that a weak number could be in the making for September’s payroll report.
The US dollar briefly fell on the report but managed to recover following strong numbers from manufacturing sector and consumer sentiment data.
Manufacturing activity rises to a 6-year high
The ISM’s manufacturing PMI data showed that factory sector activity rose to a 6-year high. The data managed to offset the rather disappointing jobs report. According to the Institute for Supply Management, manufacturing PMI rose to 58.8 in August, accelerating from 56.3 in July.
The recent weakness in the US dollar was partly responsible as strong growth and a weaker US dollar helped US exporters in the international markets. Timothy Fiore from the ISM said that there was evidence that the US factory sector was shifting into high gear after nearly a steady pace of activity for the most part of this year.
Stronger economies overseas were seen contributing to higher sales and rising demand for US goods and products. According to the ISM’s report, manufacturers were said to report higher prices for raw materials, suggesting that an increase in consumer prices could be around the corner.
US consumer sentiment rises in August
The University of Michigan’s consumer sentiment indicator showed a positive sign for household spending heading into the fall. Data showed that consumer sentiment index rose to 96.8 in August, posting decent gains from 93.4 that was seen in July. However, the UoM’s consumer sentiment index was down from the preliminary estimates of 97.6
The data suggested that consumer attitudes were positive. Earlier in the week, personal consumption expenditure was seen rising just 0.1% while personal spending rose just 0.3% missing forecasts of 0.4%. However, personal income rose 0.4% which could potentially see some pickup in consumer spending in August.
The week ahead
The US dollar will be taking a break as focus shifts to the ECB. Still the economic calendar from the US includes some key data points such as the ISM’s non-manufacturing PMI. Estimates point to a modest increase from July’s 53.9 to 55.5 in August.
The week is also dominated by speeches from a number of Fed officials. The Fedspeak starts off with Brainard, followed by Neel Kashkari, Kaplan, Dudley and Harker. With the Fed meeting due later this month, the Fed speeches will perhaps add more clarity especially on inflation and further plans for a rate hike.
The Fed has also signaled that it will begin its balance sheet normalization starting this month.
So far the US dollar has remained on the back foot driven by soft growth and a stronger euro. However, this could potentially change as the ECB will need to battle the higher exchange rate that could potentially threaten inflation and other eurozone economies that cannot afford a stronger exchange rate.
