Number of new payrolls increases but still slower than in July (Afternoon analysis 7.08.2020)

In the afternoon, the long-awaited report on the US labour market for July was published. In the case of the most important metrics, it surprised positively. In the private sector, 1,462 million payrolls were added, nearly 0.3 million above the expected. The dollar appreciates against most currencies.

1.5 million is still not enough

Growth pace of the average salary also increased (by 0.5 percentage point) above the economists' consensus, which amounted to 4.8% per year (or 0.2% if we look at it monthly). The unemployment rate also dropped from 11.1 to 10.2%, 0.4 percentage points more than expected.

Of course, there are some problems with the data from the report. The unemployment rate has fallen, among others, because the workforce has decreased. The Bureau of Labor Statistics (BLS) also reported that if the unemployment rate was calculated correctly, it would be 1 percentage point higher - a mistake that has been repeated since the beginning of the pandemic but is being reduced.

In turn, the increase in employment in the private sector by nearly 1.5 million, although slightly above expectations, was about 3.3 million lower than in June. Nearly 13 million people are still unemployed, of which almost ⅔ is counting on returning to work. This may, however, depend mostly on what kind of fiscal stimulus package Congress will work out - if it does, as media reports show that the consensus is far from being reached, and in the absence of consensus the president may apply executive orders.

The amount of fiscal aid and when the Americans receive it will depend on the consumer demand that they will have in the coming months. If this demand is not high enough, some of the aforementioned temporarily lost jobs may turn out to be permanently lost.

Report on the US labour market for July can be seen as not bad. However, it indicates a slowdown in employment growth. The jobs that could have been restored the quickest - have been re-established, but it will be more and more difficult to get further increases, so in the case of the USA, the widely debated fiscal aid is now so important.

The dollar goes up slightly but it is still weak

In the afternoon, after the publication of data from the USA, demand for the dollar increased slightly. The EUR/USD quotations were about 0.8% below yesterday's closing and dropped to 1.18. However, these are not yet any fundamental changes in the trend we have seen in recent weeks. Probably only a "confirmation" in the form of a solid labour market report for August (it will be published on the first Friday of September) may cause an increase in demand for the dollar.

Higher demand for the US currency may also be influenced at some point by increased geopolitical tensions, especially between the US and China. For the time being, it has a limited impact on the market. Still, recently we have been receiving information about some action, regulation or sanctions - and sometimes even many at once - that exacerbate the tension. This afternoon the White House administration has imposed new sanctions on several government officials in Hong Kong, including the elected head of the Hong Kong administration, Carrie Lam.

Currently, today's strengthening of the dollar should be seen more in the context of recovery rather than an upward trend. The USD/PLN exchange rate rose to 3.75 in the afternoon, but it is still close to the two-year lows. The EUR/PLN exchange rate, on the other hand, moved in the afternoon to around 4.40, which was a result of the somewhat weaker condition of the euro globally caused by the dollar's appreciation - most of the emerging countries' currencies were gaining against the euro. By the end of the day, no major changes are likely to be expected, due to the almost empty calendar of planned macroeconomic events. After the weekend, market volatility may increase slightly as a result of the consensus on the fiscal package in the US Congress or not. For the zloty, however, this should not mean fundamental changes.