United States: Weak payrolls and softer retail sales – TD Securities
TD Securities notes July payrolls surprised sharply to the downside, with headline jobs dragged by government hiring, while private employment stayed near breakeven.
TD Securities reports that July payrolls came in below expectations, with private employment remaining near breakeven. The firm anticipates a decline in July Retail Sales, aligning with the weaker labor data, though they still view overall economic activity as stable due to mixed but expansionary ISM readings and robust Q2 underlying GDP growth.
July payrolls surprised with a -23k job gain, while revisions subtracted 103k jobs from May and June, with government hiring being the primary drag. The unemployment rate declined to 4.1%, but participation edged down. Private sector hiring was in line with the breakeven rate, while government jobs (-53k) negatively impacted the headline due to increased local education employment.
The jobs report suggests longer-term stability rather than monthly volatility. The Fed's focus remains on inflation data amid two consecutive supply shocks, as the labor market was not a primary source of inflationary concerns. Retail sales are expected to decline 0.2% month-over-month in July, with auto and gas sales leading the weakness.
Despite the mixed ISM readings and robust Q2 underlying GDP growth, TD Securities maintains its view of economic activity as stable.
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