Unemployment is a lagging indicator, therefore, due to inertia, the employment passing peak may hide the change in the economic trend due to worsening expectations.
The deformation of the labor market in the retail sector is due to the introduction of Amazon innovations aimed at reducing the sector's dependence on manual labor. A factor that globally affects employment and can set undesirable trends in the future.
There are hopes that the growth of salaries is lagging behind and will take a course to climb several months after reaching the key unemployment level (4.6% according to the Fed).
Employment of the population is closely linked to a sense of stability and confidence in the future, which is well reflected in the consumer sentiment index. However, it should be noted that the contraction of the labor market, i.e. layoffs occur as a reaction of firms to falling consumer demand, so the deterioration in consumer sentiment usually precedes the growth of unemployment. History perfectly confirms this relationship (check out our blog for respective chart)
While consumer expectations are at a high level, about 100 points over the past few months, indicate strong demand, job growth is expected to stay sufficient to maintain unemployment at current levels or even lower. As noted before, the Fed will still try to determine the "boiling point" where unemployment and will again enter a stable correlation, before explaining their position on the third rate hike.
During the European session, the dollar index declined slightly and meets the NFP relatively calm. Risk appetite has risen sharply, as evidenced by emerging market currencies, as well as Asian and European stock markets in the growth zone. Oil went into decline, while the spread between WTI and Brent continues to grow. Gold went into growth as some investors decided to reinsure themselves before the release of the key indicator in the US.
This analysis is provided as general market commentary and does not constitute investment advice.