US non farm payrolls better than expected

Stock markets in Europe recovered slightly after US jobs data came in better than the market had expected, providing some relief to the huge share price falls witnessed this week.

US non farm payrolls posted an increase of 117,000 in July, higher than the 85,000 expected whilst private payrolls grew by 154,000 and the US unemployment rate fell to 9.1%.

The immediate reaction saw a big jump in equity prices, which helped the FTSE 100 to recover immediately around 90 points from the days 2% losses. The FTSE 350 mining sector attracted much of the fresh buying on the back of the jobs figures, helping the sector to recover and make gains on the day having traded lower by 2% earlier. The banks also saw some waves of buying too although this was certainly more limited in comparison to the miners.

It is important to note however that many of the buy trades we saw from investors were placed on very short term contracts, emphasising that the concerns over global growth will not disappear with today’s jobs figures.

Are these jobs figures strong enough to change investors’ mindset? 
Perhaps not. It’s not a hugely cheerful reading of July’s labour market situation in the US but certainly given the volatility and concerns that have driven stock markets around the world lower by around 10% this week, it’s a bit of a relief. That said, US unemployment rate remains stubbornly above 9% and we need to see a consistent improvement in the US labour market to ease concerns that US growth will not slip back into a recession, particularly with huge spending cuts to come. If the US labour market was in a proper recovery mode, we would likely have seen a much stronger number and investors know this. Therefore, the gains we have seen on the back of the jobs report remain liable to fresh waves of selling, particularly if investors are unwilling to carry risk over the weekend.