Stock Market Today – Friday, Aug 05: What You Need to Know – TipRanks

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Nonfarm Payrolls Beat Expectations

Last Updated 10:00 AM EST

Equity markets are in the red 30 minutes into today’s trading session. As of 10:00 a.m. EST, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq 100 are down 0.3%, 0.6%, and 1.2%, respectively.

On Friday, the Bureau of Labor Statistics released its Nonfarm Payrolls report, which came in way better than expected. This report measures the change in the number of individuals employed during the previous month but doesn’t include the farming industry. In July, job growth was 528,000 versus the forecast of 250,000.

The Bureau of Labor Statistics also released payroll data for manufacturing and private nonfarm jobs. Private nonfarm and manufacturing payrolls both beat expectations, coming in at 471,000 and 30,000, respectively.

Furthermore, the unemployment rate actually fell to 3.5% from 3.6%, which beat expectations as well. However, labor force participation ticked down slightly from 62.2% to 62.1%.

This is not ideal, as it shows that fewer people are working as a percentage of the total working-age population. Nevertheless, it’s a very small change that doesn’t have a material impact on the economy.

Given that nonfarm payrolls beat expectations by a significant amount, it could signal to the Federal Reserve that it hasn’t tightened enough to stop inflation. This is especially true since the unemployment rate has remained steady near all-time lows. As a result, it will use this data to justify higher rates if inflation continues to remain high.

Pre-Market Update

Stock futures were mixed early on Friday ahead of the much-awaited June jobs report, which is due out later in the day. This data will give investors a clearer idea about where the economy is headed.

Futures on the Dow Jones Industrial Average (DJIA) gained 0.06%, while those on the S&P 500 (SPX) inched 0.03% lower, as of 5.49 a.m. EST, Friday. Meanwhile, the Nasdaq 100 (NDX) futures retracted by 0.12%.

At the end of the regular session of Thursday, the S&P 500 and the Dow were down 0.08% and 0.26% respectively, whereas the Nasdaq 100 gained 0.44%.

Economists expect a significant number of jobs to have been added in July. However, the number is likely to have dropped month-over-month. More precisely, the consensus of economists is looking at an addition of 258,000 jobs in July, which is lower than June’s 372,000 vacancies, according to Dow Jones.

Moreover, unemployment is expected to stay put at 3.6%, in the July report.

The reason this data is important for investors is that the labor market typically reflects economic strength. A strong job market in the middle of moderating economic growth can help the economy avoid a recession.

Investors are keen to see whether the labor market could withstand two back-to-back 75 basis-point interest rate hikes (June and July) as remarkably as it did after May’s 50 basis-point hike.

So far, the Fed has drawn strength from the strong labor market to pursue its monetary tightening campaign aggressively. In this regard, there is a possibility for the Fed to tone down its hawkishness in the September meeting, if the July jobs market reveals a meaningful cooling in the job market.


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