US Dollar: Labour market still solid – Danske Bank
Danske Research Team expects United States (US) Nonfarm Payrolls (NFP) to rise by 70k in July, with the unemployment rate steady at 4.2% and average hourly earnings up 0.3% m/m. They note leading indicators still point to solid labour conditions, while productivity gains limit unit labour costs, suggesting the labour market is not a major inflation driver for the Fed.
NFP seen modest, unemployment steady
"The most important data release will be the US July Jobs Report. We forecast nonfarm payrolls at +70k, the unemployment rate unchanged at 4.2%, and average hourly earnings at +0.3% m/m s.a."
"Most leading data still point towards solid labour market conditions, although weak labour supply growth also weighs on the employment growth outlook. The unemployment rate remains the Fed's primary focus. "
"In the US, the July Challenger Report showed 33,429 announced layoffs, the lowest level since July 2024. The share of AI-linked layoffs continued to rise and now accounts for up to 33% of total layoffs. Initial and continuing jobless claims remained little changed at low levels, with the latter rising to 1.801m in the week ending 25 July."
"Productivity growth picked up to 1.4% q/q AR in Q2 from 0.3% in Q1, limiting unit labour cost growth to 1.3% q/q AR from 1.8%. The Fed will be glad to see that the labour market has not been a significant source of inflationary pressure. For now, productivity growth remains consistent with historical levels, suggesting no clear AI-driven acceleration yet."
"Attention also turned to Fed communication, with the FT reporting that Chair Warsh will stick to his no-guidance policy. People familiar with his thinking said Warsh would be prepared to raise interest rates at the September meeting if upcoming inflation prints remain elevated and markets price in higher borrowing costs. Warsh is expected to explain the intellectual framework behind his communication strategy at Jackson Hole on 22 August."
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