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Rising US Dollar Dampened the July Jobs Report: SPY Fell 0.82%

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Rising US dollar affects the July jobs report

The US dollar (UUP) has been strengthening. It’s hampering the US economy’s (SPY) (IVV) export competitiveness by pushing up the relative cost of US goods in foreign markets. For the most part, falling oil prices (USO) have been affecting energy (XLE) firms’ margins this year. This is leading to investment cuts and even layoffs in the sector.

Falling export competitiveness, combined with the energy sector’s woes, weighed down the US private payroll report for July. The benchmark tracking SPDR S&P 500 ETF Trust (SPY) fell 0.82% on the weak jobs report. So far, SPY has returned 1.37% this year.

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ADP National Employment Report

According to the latest ADP employment report released on August 5, the non-farm private payroll gained 185,000 jobs in April against median expectations of 215,000. Higher consensus expectations were for a gain of 263,000 jobs. Considering falling oil prices and more consumer and business spending, we might have expected to see more jobs in the consumer sector.

The July reading fell short of the median estimate by 30,000 jobs. The private sector payroll report has certainly lowered expectations from Friday’s U.S. Bureau of Labor Statistics “Employment Situation” report.

Sector-by-sector impact

Job growth in the construction and professional and business services sector was strong in July. Job gains in the manufacturing and the trade, transportation, and utility sectors reported weak job growth in July.

In terms of the number of positions created, professional and business services led the job gains with 42,000 new positions—a 0.21% rise since June. This was followed by the trade, transport, and utility industry. It added 25,000 jobs during the month.

Service sector companies like Discovery Communications (DISCK) (DISCA) and CBS (CBS) made good gains at the market close on August 6. DISCK rose 4.68%, DISCA rose 3.48%, and CBS rose 3.61%. The financial activities industry added another 10,000 jobs. However, jobs in this sector only rose 0.12%—a fall from the 0.20% rise in June. The US financial sector has been affected by the rising US dollar and the currency war. The construction sector added about 15,000 jobs—a 0.23% rise since June. The manufacturing sector only added 2,000 jobs in July.

The fall in jobs was also evident in the jobless claims report released on August 6. It marked a rise in claims for unemployment insurance for the week ending August 1.

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