06 July 2021
Just the job
Better-than-projected employment figures concluded a buoyant week for US markets, which had continued to reach historic highs in readiness for the data.
As Friday opened, figures circulated were anticipated to show that the US had bolstered its economy with 720,000 jobs – representing the sixth consecutive month of growth. However, the actual growth surpassed this number, at 850,000.
Perhaps unsurprisingly, the leisure and hospitality sector witnessed the largest growth, adding 343,000 new jobs in the month. This would indicate a healthy bounce-back following an extended problematic period due to COVID-19.
Ian Shepherdson, Chief Economist at Pantheon Macroeconomics, commented:
“Overall, this report signals incremental progress in the pace of job growth, but there’s no sign yet of a shift back into the labour force. The missing millions are still missing, but it’s too soon to see any impact of the early ending to the $300 per week unemployment benefit uplift in a few states.”
“It’s reasonable to expect a modest shift back into the labour force in July and August as more states cut off the benefit, but when the federal money runs out on 6 September, about 70% of unemployed people will still be receiving the uplift.”
US markets, which had been gaining traction over the seven-day period, mainly ended the week in a strong position, following the news. This further gave way to an uplift in European stocks on the Friday; however, this was insufficient to fully redress the slight dips seen over the rest of the week, and the FTSE 100 rounded off the week flat while the STOXX Europe 600 Index finished slightly down.
Diversity is key
The spread of the Delta variant of COVID-19 has resulted in many worries across Europe. The UK has recently experienced a surge in COVID-19 numbers, just as the lifting of the majority of restrictions (due 19 July) is within reach. While these exchanges concluded the week slightly down, the general first half of the year has been strong on either side of the Atlantic. During the first six months of the year, the FTSE 100 rose 8.57%, while the STOXX Europe 600, S&P 500, Nasdaq and Dow Jones have all seen double-digit growth since the beginning of the year.
Darren Johnson, Head of Engagement – Investment Consultancy at St. James’s Place, proposed that markets have reacted to the underlying economic improvement in the first six months of the year, which has become more certain since vaccine rollouts got underway at the end of last year.
“Markets are a leading indicator of where the economy is likely to go. And the economy is likely – we can debate it, but it’s likely – to improve from where it’s been. So, it shouldn’t be a surprise that markets have gone that way.”
He went on to say that many funds that suffered last year have gone on to do relatively well this year:
“The funds that struggled last year are the ones that, ultimately, have done the best this year. And that brings us on to the benefits of diversification: it really does show you how quickly things can change without you noticing.”