Rates Fall Ahead of August Jobs Report

Rates turn lower ahead of August jobs report

All eyes will be on tomorrow’s jobs report, the importance of which has surged after Fed Chair Powell’s comments last week. This is the last major employment indicator before the September FOMC meeting, and multiple Fed officials have said their opinion on the tapering timeline will be informed by the data.  Treasury yields and swap rates closed 1-2 bps lower across the curve in anticipation of the report – the 10-year UST yield finishing near 1.28%.  Major US equity indices closed in the green – the DJIA and Nasdaq each added 0.1%, while the S&P 500 increased 0.4%.

Weekly jobless claims hit a pandemic low

Initial jobless claims totaled 340,000 last week, down from 354,000 the week before.  Continuing claims also fell to its lowest level since March 2020, declining 160,000 to 2.75 million from the week prior.  The reading comes a day ahead of the August jobs report, which investors will use to gauge the health of the labor market.  The report is expected to show a 748,000 jump in nonfarm payrolls and a 5.2% unemployment rate.

The US international goods and services deficit narrowed to $70.1 billion in July

The deficit improved by $3.2 billion from the June reading after exports jumped by 1.3% while imports fell by 0.2%.  Capital goods exports saw the largest rise, while consumer goods imports experienced the largest decrease.  Trade surpluses were recorded with South and Central America ($21.2B), Hong Kong ($8.4B), Brazil ($6.1B), Singapore ($5.1B), United Kingdom ($4.9B), and Saudi Arabia ($2.0B).  Deficits were seen with China ($82.9B), European Union ($37.7B), Mexico ($26.0B), Germany ($18.2B), Japan ($14.8B), India ($11.8B), Taiwan ($9.5B), Canada ($9.3B), Italy ($9.3B), France ($5.3B), and South Korea ($4.3B).  Year to date, the trade deficit has widened by $131 billion from the same period last year.