WeekWatch -‘Better-than-expected employment figures capped a strong week for US markets’ July 2021
Better-than-expected employment figures capped a strong week for US markets, which had continued to chart into historic high territories in anticipation of the data.
Figures released at the start of Friday were expected to show the US had added 720,000 jobs to its economy – which would represent the sixth consecutive month of growth. The actual growth exceeded this number, at 850,000.
The sector that saw the largest growth in headcount was, perhaps unsurprisingly, leisure and hospitality, which added 343,000 new jobs in the month, suggesting it’s bouncing back after a prolonged, COVID-19-induced period of difficulty.
“Overall, this report signals incremental progress in the pace of job growth, but there’s no sign yet of a shift back into the labour force. The missing millions are still missing, but it’s too soon to see any impact of the early ending to the $300 per week unemployment benefit uplift in a few states,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
He continued: “It’s reasonable to expect a modest shift back into the labour force in July and August as more states cut off the benefit, but when the federal money runs out on September 6, about 70% of unemployed people will still be receiving the uplift.”
US markets, which had been rising all week, generally ended the week on a high as a result of the news. It also encouraged a rise European stocks on the Friday; however this wasn’t enough to fully compensate slight falls seen over the rest of the week, and the FTSE 100 finished the week flat while the STOXX Europe 600 Index finished down slightly.
Part of the worry in Europe has been the spread of the Delta variant of COVID-19. The UK has seen a recent spike in COVID-19 numbers, just as the end of the restrictions (due 19 July) approaches. While these exchanges may have finished the week slightly down, the overall first half of the year has been positive on both sides of the Atlantic. Over the first six months of the year, the FTSE 100 rose 8.57%, while the STOXX Europe 600, S&P 500, Nasdaq and Dow Jones have all experienced double-digit growth since the start of the year.
Speaking about the market improvement in the first half of this year, Darren Johnson, Head of Engagement – Investment Consultancy at St. James’s Place, suggested that markets have responded to the underlying economic improvement that has become more likely since vaccine rollouts began at the end of last year.
“Markets are a leading indicator of where the economy is likely to go. And the economy is likely – we can debate it, but it’s likely – to improve from where it’s been. So, it shouldn’t be a surprise that markets have gone that way,” he said.
He added that many funds which struggled last year have done reasonably well this year. He said: “The funds that struggled last year are the ones that, ultimately, have done the best this year. And that brings us on to the benefits of diversification: it really does show you how quickly things can change without you noticing.”
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