Technical Analysis: US market outlook – Employment return but total labour force participation rate is still lacking. July 5, 2021 266

  • Unemployment rate grew to 5.9%, up by 0.1% from May 2021.
  • Total Labour force participation rate remain stagnant, which indicate that the job market is not out of the woods yet.
  • All eyes will be on the Federal Reserve this coming Thursday’s meeting minutes release. Broader expectation expects the Federal Reserve to maintain its interest rate at 0.25% but the tonality and the statement will be the key.
  • Reverse repo will be the concern too as there is nearly a record Trillion dollars in cash gushing into the Fed’s reverse Repo facility.

The Non-Farm payroll has added 850k jobs, but sluggish growth has put back the unemployment rate to 5.9%. Hence, the job market performance is rather lacklustre as compared to a year ago in June 2020, where jobs placement has surge pass a million mark.

 

Last month, the Federal Reserve has mentioned that the raising of rate may come as soon as 2023 but the asset purchase program remain unchanged as the Federal Reserve wish to have diverse data to chart their next course of action in which job data is the crucial. Simply put, the unemployment rate must return to below 3.1% and the constant growth of jobs added above the 1 million marks.

Despite strong data in the month of March 2021 where NFP reported over a million-job created, the expectation is still way below the 10 million jobs created back before pre-Covid in March 2021. Furthermore, the recovery momentum slowed down after June 2020. Hence, the Federal Reserve may remain status quo on their interest rate and asset purchase programme.  

means that the stimulus package has push back workers from engaging in any form of work and workers have more bargaining power to choose what kind of jobs they are into.  

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Profile photo of Chua Wei Ren

Chua Wei Ren
Technical Analyst
Phillip Securities Research Pte Ltd

Wei Ren specialises in Technical Analysis and has 11 years of experience in studying classic technical price action. He also study and research extensively on Elliott wave theory, Dow Theory. He believes that history plays an important role in how the market is reflected in the future.

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