TD Securities reports that July payrolls in the United States surprised sharply to the downside, with headline job gains at -23,000 and negative revisions subtracting 103,000 jobs from May and June figures. The unemployment rate declined to 4.1%, but this was attributed to a decrease in labor force participation rather than genuine labor market improvement [1]. Private sector employment increased by 30,000, which TD Securities notes is roughly in line with the breakeven rate for the year, while government jobs fell by 53,000, primarily due to losses in local government education [1].
TD Securities cautions against extrapolating too much from the July jobs report, describing the results as reflective of monthly volatility amid longer-term stability. The firm emphasizes that the labor market was not the main source of inflationary concerns for the Federal Reserve during this cycle, and suggests that the latest jobs data reduces the urgency for further rate hikes while alleviating fears of labor market-driven inflation acceleration. Attention is expected to shift to upcoming inflation data [1].
On the consumer side, TD Securities forecasts that July retail sales likely declined by 0.2% month-over-month, marking the first drop since January. This follows a subdued 0.2% increase in June. The anticipated decline is expected to be led by negative auto and gas sales, with control group sales likely flat due to normalization after Amazon Prime Day [1].
Despite the weak payroll and retail sales data, TD Securities maintains that overall economic activity remains stable. The firm points to mixed but expansionary ISM readings from the previous week and robust underlying GDP growth in the second quarter as evidence of continued economic resilience [1].
CONCLUSION
While July's payroll and retail sales data point to softness in the US labor market and consumer spending, TD Securities sees these as signs of volatility rather than a shift in the broader economic trend. The firm expects the Federal Reserve to focus on upcoming inflation data, with no immediate change in policy stance anticipated.