A shock US jobs report has all but ended the case for a September rate hike, according to the CEO of a leading independent financial advisory.
The Bureau of Labor Statistics reported on Friday that the US economy shed 23,000 jobs in July, a sharp reversal from the roughly 80,000 to 95,000 gain economists had forecast.
The unemployment rate tickled down to 4.1% from 4.2%, but that improvement was overshadowed by steep downward revisions.
June’s already modest gain was cut to 20,000 from 57,000, while May’s total was slashed nearly in half to 66,000 from 129,000.
Gold had already been climbing into the release, trading near a seven-week high and on track for its strongest week since January, as investors positioned for exactly this kind of surprise.
Nigel Green of the deVere Group said the scale of the miss removes almost any realistic path to a September rate increase.
“A jobs report this weak, layered on top of two months of substantial downward revisions, makes a hike next month almost impossible to justify,” he said.
“Three consecutive months of softening data is not noise. It’s a labour market losing momentum in a way policymakers cannot responsibly ignore.”
The deVere CEO noted that markets are already repricing accordingly.
“Gold was rallying into this release, and reports of weak hiring will likely extend that move further.
“When a currency loses support at the same time a safe-haven asset gains it, that combination tells you plainly which way sentiment has shifted.”
Green pointed to the dollar as the clearest early casualty of the surprise.
“Fewer jobs and slower wage growth reduce the case for tighter policy, and the dollar tends to weaken quickly once markets stop pricing in a hike.
“Investors who spent recent weeks preparing portfolios for a September increase now need to unwind that positioning fast.”
The deVere CEO added that the scale of the revisions matters as much as July’s headline figure.
“Downward revisions of this size change the entire narrative around the labour market’s recent strength.
“May’s number was cut by roughly half. June’s was cut by nearly two thirds. This is not a one-month blip. It’s an economy that has been losing jobs momentum for a season while the data initially suggested otherwise.”
He argued the report leaves the Fed with little room to manoeuvre.
“Officials who were debating whether to raise rates now face a labour market that is quietly deteriorating.
“Holding steady is no longer simply the cautious option. It is close to the only credible one available.”
Green said gold’s rally reflects investors positioning ahead of, rather than reacting to, this shift.
“Gold heading into its best week since January, even before this report landed, tells you smart positioning was already underway,” he said. “Weak jobs data typically extends that kind of move rather than reversing it.”
He concluded that six weeks ago, investors were bracing for a possible hike.
“Friday’s numbers make that outcome hugely unlikely.
“Investment portfolios positioned for tighter policy need a serious rethink, and gold, along with other assets that benefit from a softer dollar and lower rate expectations, deserve fresh attention heading into the autumn.”
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