Stronger jobs figures than had been widely expected and renewed talk from the White House about a tax break for overseas corporate profits pushed the Dow Jones industrial average to a new high yesterday.
US unemployment fell to a 16-year low in July as hiring surged ahead of expectations, the Department of Labor’s employment report showed, prompting a shortening of odds on a Federal Reserve rate rise later in the year.
The Dow broke through the 22,000-points mark for the first time on Wednesday, powered by strong earnings reports from America’s big companies and a falling dollar. On Thursday the index closed at a record high for the seventh successive session. At lunchtime in New York yesterday it was on track for yet another all-time high, up by 37 points at 22,063.13.
The employment report showed that 209,000 jobs were added to non-farm payrolls last month, down from a revised 231,000 in June but ahead of expectations of 178,000. Unemployment fell to 4.3 per cent from 4.4 per cent as average hourly earnings rose by 0.3 per cent, after a 0.2 per cent gain in June.
Ryan Wang, an economist at HSBC, said: “All of these developments show that labour conditions are continuing to strengthen. If unemployment does continue on a downward path for the rest of this year, as we expect, then we believe the [Fed] will continue tightening policy with another 25 basis-point rate hike in December.”
Advertisement
President Trump tweeted: “Excellent jobs numbers just released — and I have only just begun. Many job-stifling regulations continue to fall. Movement back to USA!”
However, Marcus Bullus, trading director at MB Capital, suggested that Washington was proving to be a drag on the economy. “Market-watchers have so far been able to ignore the president’s increasingly stalled policy agenda and the tightening net of Robert Mueller’s Russia probe, but markets can only look past political developments for so long,” he said.
The probability of a December rate increase was roughly evens after the report was published yesterday. It was about 45 per cent on Thursday, according to the Fedwatch tool from CME Group, which tracks futures prices.
Gary Cohn, chief economic adviser to Mr Trump, said yesterday that a tax break for $2.6 trillion of corporate cash stored overseas by American companies would form part of measures soon to be introduced by the White House.
The dollar rose 0.35 per cent against a basket of world currencies shortly after the report was released. Yields on benchmark ten-year treasuries were up by 1.76 per cent to 2.26 per cent. Gold was down by 0.5 per cent at $1,268.60.
Advertisement
Employment in food services and drinking places rose by 53,000 in July, the most of any sector. Payrolls in manufacturing and temporary help services, swelled by 16,000 and 15,000, respectively.
A separate report showed that America’s trade deficit narrowed further than expected in June, to $43.6 billion from $46.4 billion the month before. The report prompted Goldman Sachs to edge up its forecast for third-quarter growth to 2.6 per cent from 2.5 per cent.
