Wall Street (flickr photo/ Dan Nelson)
The American employment report published on Friday was a good report, therefore the estimate is increasing that the Federal Reserve will continue to raise interest rates at fast rates and at high rates in order to cool the economic/inflationary activity.
“The robustness of the employment market increases inflationary pressures and will require the Fed to raise interest rates by 0.75%, the season of earnings reports reflects the deterioration in consumer demand. The employment report, published on Friday, surprised significantly to the upside, and indicated the addition of 528 thousand new jobs in July, compared to Early estimate of 250 thousand.
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The strong figure illustrated that the steps taken by the Fed in an attempt to cool the labor market have not yet yielded results. The unemployment rate also dropped to 3.5% (compared to an expected 3.6%). The rate of participation in the labor market also dropped to 6.1%, which may only increase even more the spiral in the increase of wage levels.”
GLOBAL X also writes that the Fed clarified at its last meeting that its policy will depend on the economic data, and therefore the strong employment report is expected to lead the bank to continue the policy of aggressive interest rate increases. The starting assumption now is for an interest rate increase of 0.75% at its next meeting, unless the data indicates otherwise.
“In the technology stocks sector, the CHIPS Act benefits the American economy and the manufacturing sector, as it provides incentives for the establishment of factories. It also reduces dependence on Chinese manufacturing and protects the American supply chain from geopolitical instability. The law seems to It will already be priced in the shares of the chips, which climbed in the last month.
“So far, the earnings report season shows that there is a certain deterioration in business sentiment, with more and more companies reporting a decrease in demand. However, analysts still expect growth to accelerate in the second half of the year.
“The situation in the employment market is very good, but the consumer is adversely affected by inflation. So far, only 16% of the companies in the private consumption sector have published their reports, and this is the sector that should be most affected by inflation.”
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