over 2 years ago • 1 min
US unemployment dropped to a fresh post-pandemic low in July as more Americans than expected found new jobs.
Unemployment fell more than forecast to 5.4%, according to a report on Friday, below the 6% average rate since the start of the century (shown in pink on the chart). The leisure and hospitality sector was responsible for the biggest increase in jobs as more restaurants and hotels reopened.
Investors reacted to the strengthening labor market by selling US government bonds (a.k.a. Treasuries) and buying stocks. The decline in bonds pushed up the yield on the benchmark 10-year Treasury by as much as 7 basis points to 1.29% as of 9am in New York as investors bet the improved jobs picture would increase the chance of inflation. Futures on the S&P 500 gained as much as 0.2% before dropping back again.
The data increases the chance the Federal Reserve (Fed) will hike rates or slow the pace of quantitative easing (QE) sooner rather than later. Officials at the US central bank have said they want to see “substantial” further progress in the labor market before taking any action.
"For the Fed, this report is the first of several strong job reports that would be necessary to signal 'substantial further progress' in the labor market," research firm Oxford Economics wrote. "As such we maintain our view that the Fed is on course to commence QE tapering in early 2022."
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