US labour market contracts in July, S&P 500 closes at record high

The American labour market showed unexpected contraction in July: 23,000 jobs were lost outside the agricultural sector. Economists had expected growth of 80,000 jobs. Despite this disappointing figure, the S&P 500 closes at a new record level.

In short:

• The US jobs market loses 23,000 jobs in July, while markets expected an increase of 80,000.
• The chance of a Fed rate hike in September falls from 55% to 44%.
• The S&P 500 rises 0.62% to a record closing price, partly supported by strong corporate results.

Jobs report disappoints

The most recent jobs data from the US surprise negatively. Where analysts expected an addition of 80,000 jobs outside agriculture, the Bureau of Labor Statistics report actually shows a loss of 23,000 jobs. This puts the figure more than 100,000 jobs lower than expected.

In addition, job growth over the previous two months is revised significantly downwards. Reuters reports that the market immediately responds to the weaker labour market data. The chance that the US central bank will raise interest rates in September falls from 55% to around 44%.

S&P 500 nevertheless at record high

Despite the disappointing labour market figures, the S&P 500 closes on 7 August with a gain of 0.62% at a new record level. The index is supported by notably strong quarterly results from companies. Of the 436 S&P 500 companies that have already reported, as many as 85.1% beat analysts’ expectations. For comparison: the historical average since 1994 stands at 68%.

The combination of a weaker jobs market and a lower chance of rate hikes seems to reassure rather than alarm investors. A lower interest rate is generally favourable for risky investments, including stocks and crypto. For the Bitcoin price, such macroeconomic developments can play a role in sentiment on the crypto market in the short term.