The U.S. Labor Department released July’s employment report confirming the continuation of solid labor market performance. The American economy added 215,000 jobs in July versus an expected gain of 225,000. Revisions to prior reports were a net gain of 14,000 jobs. The overall unemployment rate remained at 5.3% and average hours worked increased to 34.6 versus 34.5 in June. I would characterize the July employment report as confirming the Fed's recent indications that an increase in rates may happen in September.
The market's reaction over the past week has been for equity, commodity and risk markets to be weak, while bond markets rallied as the yield curve flattened. I expect this trend to continue for the next few weeks. Risk markets will most likely struggle as we get closer to the potential Fed tightening. I also expect volatility to increase in coming weeks.
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