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London Quick Take - 10 Aug - UK jobs market shows signs of life, soft US payrolls turns focus to CPI report
Neil Wilson
Investor Content Strategist
Note: This is marketing material. This article is not investment advice, capital is at risk.
The –23k print therefore should come as not entirely unexpected even if the economy if rattling along just fine. The average of the last 12 months is now +34k, which is still above the zero line implied by the Fed's research as being just fine.
So, the market could easily be overreacting to this payroll print and too keen to see the glass half-full in terms of rates. The next test for the Fed is this week's US CPI report, which though will be closely watched may not be enough in itself to show whether the 3 hawks who voted to raise rates at the July FOMC meeting were right to be worried about the persistently higher inflation. A softer inflation print will give the FOMC more scope to stay on hold in September, but a firmer one would start push expectations back towards a hike. Will have more on this in tomorrow's note.
Geopolitical tensions remain but don't seem to be particularly directional. Iran ruled out direct talks with the US, and President Trump said the US was "only semi-negotiating" with Tehran, dousing hopes for an imminent agreement following remarks by Treasury Secretary Scott Bessent. More of the usual in this forever conflict. Oil prices are firmer since the weekend with Brent crude nudging $85 overnight before paring gains a bit but now rests on its 50-day SMA support after the 200-day line was tested and held on Friday.
Meanwhile, the FTSE 100 is close to taking out its closing high of 10,910, though it's failed to breach the intraday high hit on 31 July and is about -0.2% lower again this morning. It's generating a lot of cash right now for investors and looks reasonably immune to fears about AI bubbles and higher volatility tech stocks where chip stocks have been particularly volatile of late. And while the labour market in the UK has not been a big factor for the blue chips, there are more encouraging signs on that front too. The REC/KPMG employment index hit 50pts in July - the first time it's not been in contraction territory in almost 4 years. Signs of life perhaps for the UK economy?
Gold – the bottom may be in at $4,000 after a long period of consolidation, but we need to see further consolidation around $4,200 and a firm base there for a push to the 200-day moving average around $4,500.
Companies - Berkshire Hathaway is seeing some strategy shift in evidence with the new CEO, with the company for the first time in 15 quarters buying more stock than it sold. Meanwhile we have some interesting earnings updates tonight from a couple of space tech economy companies that have been popular with retail investors with RocketLab and AST SpaceMobile due to report.
An unexpectedly soft payrolls report in the US sent stocks on Wall Street higher on Friday and reset expectations for the Fed, with front end yields pulling back as traders trimmed rate hike expectations. The major US indices had their best week since April and the S&P 500 closed at a record high. The Nasdaq rallied 5% over the week as chip stocks bounced +7%.
July's nonfarm payrolls showed a drop of -23k jobs and more than -100k in downward revisions, but the unemployment rate declined to 4.1% due to a decline in participation. As noted previously however, the breakeven employment rate has changed dramatically, which has implications for these monthly jobs reports.
The Fed itself notes that "employment growth in any given month is almost as likely to be negative as it is to be positive. Furthermore, these negative prints of job growth could be large in any given month [...] it would not be unusual for there to be one or more months in 2026 with declines in total payroll employment as large as -100,000 jobs, even if economic output was growing at the rate of potential output growth.”
July's nonfarm payrolls showed a drop of -23k jobs and more than -100k in downward revisions, but the unemployment rate declined to 4.1% due to a decline in participation. As noted previously however, the breakeven employment rate has changed dramatically, which has implications for these monthly jobs reports.
The Fed itself notes that "employment growth in any given month is almost as likely to be negative as it is to be positive. Furthermore, these negative prints of job growth could be large in any given month [...] it would not be unusual for there to be one or more months in 2026 with declines in total payroll employment as large as -100,000 jobs, even if economic output was growing at the rate of potential output growth.”
The –23k print therefore should come as not entirely unexpected even if the economy if rattling along just fine. The average of the last 12 months is now +34k, which is still above the zero line implied by the Fed's research as being just fine.
So, the market could easily be overreacting to this payroll print and too keen to see the glass half-full in terms of rates. The next test for the Fed is this week's US CPI report, which though will be closely watched may not be enough in itself to show whether the 3 hawks who voted to raise rates at the July FOMC meeting were right to be worried about the persistently higher inflation. A softer inflation print will give the FOMC more scope to stay on hold in September, but a firmer one would start push expectations back towards a hike. Will have more on this in tomorrow's note.
Geopolitical tensions remain but don't seem to be particularly directional. Iran ruled out direct talks with the US, and President Trump said the US was "only semi-negotiating" with Tehran, dousing hopes for an imminent agreement following remarks by Treasury Secretary Scott Bessent. More of the usual in this forever conflict. Oil prices are firmer since the weekend with Brent crude nudging $85 overnight before paring gains a bit but now rests on its 50-day SMA support after the 200-day line was tested and held on Friday.
Meanwhile, the FTSE 100 is close to taking out its closing high of 10,910, though it's failed to breach the intraday high hit on 31 July and is about -0.2% lower again this morning. It's generating a lot of cash right now for investors and looks reasonably immune to fears about AI bubbles and higher volatility tech stocks where chip stocks have been particularly volatile of late. And while the labour market in the UK has not been a big factor for the blue chips, there are more encouraging signs on that front too. The REC/KPMG employment index hit 50pts in July - the first time it's not been in contraction territory in almost 4 years. Signs of life perhaps for the UK economy?
Gold – the bottom may be in at $4,000 after a long period of consolidation, but we need to see further consolidation around $4,200 and a firm base there for a push to the 200-day moving average around $4,500.
Companies - Berkshire Hathaway is seeing some strategy shift in evidence with the new CEO, with the company for the first time in 15 quarters buying more stock than it sold. Meanwhile we have some interesting earnings updates tonight from a couple of space tech economy companies that have been popular with retail investors with RocketLab and AST SpaceMobile due to report.
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