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LGT Navigator: US labor market report in focus

September 2, 2022

Today (14:30 CET), the monthly US job market statistics will once again be the focus of the capital markets. If the labor market continues to prove robust and wage growth remains solid, this should “force” the Federal Reserve to further tighten the interest rate screw to dampen the strong inflationary pressure. Recent data from ADP showed somewhat slower momentum in employment growth, but also upward pressure in wages. In contrast, the latest purchasing managers' survey data from the industrial sector reaffirmed the outlook for a cooling economic trend.

US labor market report in focus

On Wall Street, meanwhile, stock indexes were able to end the four-day downward trend and showed moderate daily gains. The Dow Jones Industrial closed Thursday +0.46% higher than the previous day at 31'656.42 points. However, according to traders, the nervousness on the stock market floor remained noticeable. The broad S&P 500 gained +0.3% to 3'966.85 points and on the Nasdaq, the indices remained virtually unchanged from the previous day. Meanwhile, in the bond market, the yield on ten-year US government bonds continued to climb to 3.26% - the highest level in about two months. The price of gold on Thursday, given the prospect of further rising interest rates, continued the downward trend of recent days and fell below the mark of USD 1'700. The last time gold slipped below this mark was on July 21.

Equities in the Asia-Pacific region trended inconsistently at the end of the week. In Tokyo, the Nikkei 225 was virtually unchanged, while the Hang Seng Index in Hong Kong declined by -0.6%. The Shanghai Composite on the Chinese mainland, however, increased by about +0.3%. The MSCI index for the Asia-Pacific region outside Japan is quoted on Friday around +0.3% lower than the previous day.

Productivity of the US economy fell again significantly in the spring

Productivity, or the ratio of output to hours worked, fell by -4.1% in the second quarter on an annualized basis. Analysts had expected a decline of -4.3%. In the first quarter, productivity had fallen even more sharply by -7.4% and was the sharpest decline in this period since 1947. Unit labor costs increased by +10.2% in the second quarter on an annualized basis, which according to experts is related to the shortage of labor coupled with a robust labor market. The rise in unit labor costs is likely to further increase inflationary pressure.

ISM Manufacturing PMI falls to lowest level since July 2020

The ISM Purchasing Managers' Index (PMI), which receives much attention because of its correlation with growth in the overall US economy, slipped to 51.5 points in August from 52.2 points in July. Although the indicator thus remains above the 50-growth threshold, it suggests a weaker trend in the sector. This was due to lower new orders.

Continuing gloomy mood in euro area industry

Industrial companies in the eurozone were once again more pessimistic in August. At 49.6 points, the S&P Global Purchasing Managers' Index in August was 0.2 points lower than a month earlier, falling to its lowest level in around two years. 

Unemployment rate in the eurozone at a record low

In the euro countries, average unemployment in July fell to its lowest level since 1999, or the existence of the monetary union. According to Eurostat, the unemployment rate fell to 6.6% in the summer, well below the 7.7% recorded a year ago. Accordingly, just under eleven million people were out of work in July, 1.58 million fewer than in the same month a year earlier.

Sentiment in British industry at lowest level since May 2020

The Purchasing Managers' Index for the British industrial sector fell by 4.8 points to 47.3 in July and is now at its lowest level in 27 months. Below 50 points, the PMI signals contraction in the business sector. S&P Global commented that customers are withdrawing or postponing orders due to economic uncertainty and recession fears, as well as rising prices and material shortages.

Italy's economy grows strongly in spring

Italy's gross domestic product increased +1.1% in the second quarter from the previous quarter, giving the third-largest economy in the euro zone slightly stronger growth than previously expected. Compared with the first quarter, momentum has thus significantly improved thanks to strong private consumption – in the first three months of the year, Italy only managed growth of +0.1%.

Economic Indicators September 2

MEZ Country Indicator Last period
08:00 GE Exports (July, m/m) +4.5%
08:00 GE Imports (July, m/m) +0.2%
11:00 EZ Producer Prices (July, y/y) +35.8%
14:30 US Unemployment Rate (August) 3.5%
14:30 US Non-Farm Payrolls (August) +528,000
14:30 US Average Hourly Earnings (August, y/y) +5.2%
16:00 GE Durable Goods Orders (July, m/m) +2.0%


Earnings Calender September 6

Country Company Period
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