Trade War Unlikely to Temper Robust Jobs Growth in July

For the July jobs report due to be released on Friday August 3, our model forecasts a gain of 239K.

And, for the August report, due out on September 7, it forecasts a gain of 240K jobs. 

The model’s most important factor, credit spreads, have not widened at all in response to the U.S. tariffs on goods from China and other countries.  So long as credit remains readily available, employers might go ahead and hire despite the uncertainty of the tariffs dispute.  Another reason not to be overly concerned about the trade war (in so far as our model’s accuracy is concerned), is that the hardest hit industry might be the farm sector.  It might sound obvious, but nonfarm payrolls, by definition, don’t account for any impact on the farm sector directly.  That said, if the farm sector suffers from tariffs, it could eventually hurt employment in other sectors as farmers and their workers curtail their consumption.  However, if that were to occur, the impact would not be felt for many months into the future. 

The other factors mostly cancel out.  Rising oil prices will likely hurt employment growth slightly but the yield curve, which is substantially lagged in our model, will likely continue to support employment growth owing to its steepness over the past few years.  Tighter monetary conditions may hurt employment growth in 2019 and especially 2020 and 2021 but are of little short-term concern.

Our analysis of the previous jobs report can be found here.

About the Author

Erik Norland is Executive Director and Senior Economist of CME Group. He is responsible for generating economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their impact on CME Group and the company’s business strategy, and upon those who trade in its various markets. He is also one of CME Group’s spokespeople on global economic, financial and geopolitical conditions.

View more reports from Erik Norland, Executive Director and Senior Economist of CME Group.

Hedging the Jobs Report

The jobs report due on Friday, August 3, is forecast by our model to show continued growth in the pace of employment. Markets across the major asset classes tend to react to the data in the report. Protect your investment from uncertainty and volatility with the suite of CME Group futures and options.

Start Hedging