US falls short of new job expectations, sending dollar lower

Bureau of Labor Statistics said employment increased in professional and business services, in manufacturing, and in health care and social assistance

Donald Trump has slashed taxes for US firms in a bid to keep jobs in the country (REUTERS)

The US added 157,000 new jobs in July, falling short of expectations of 190,000, while unemployment dropped to 3.9 per cent from 4 per cent.

The US Bureau of Labor Statistics said employment increased in professional and business services, in manufacturing, and in health care and social assistance.

The dollar edged down against the pound and the euro following the data release.

Kully Samra, vice president at investment bank Charles Schwab, said while job growth significantly missed market expectations, the wider numbers “still paint a robust picture of the domestic labour market”.

“Wage growth is steady month on month and unemployment remains near its 18 year low,” he noted.

“The labour market remains fairly tight but risks to the economy remain. Trade isn’t the only cause for concern - investors are also eyeing the rising value of the dollar, slowing global economic growth and the possibility that the Federal Reserve could raise short-term interest rates too much and choke off domestic economic growth.

“However, US companies have strong balance sheets and tax reform has made it attractive to repatriate even more of their cash from foreign countries. That money can fuel business investment, expansion and stock buybacks.”

Donald Trump introduced a set of tax reforms last year which slashed US federal corporation tax from 35 per cent to 21 per cent.

Mr Samra added: “The second-quarter earnings season should provide a better look at both the health of the economy and the potential damage from the trade skirmish. Investors should be watching for more cautious tones or any scaling back of capital spending plans.”

Jacob Deppe, head of trading at the online trading platform, Infinox, said: “There were plenty of positive numbers in today’s US jobs report but few to quicken the pulse – and even fewer to move the market.

“But lurking beneath the vanilla surface of today’s jobs report is a more bitter reality – the American job creation miracle is slowly running out of road.

“With the number of people re-entering the labour market falling and the US lurching ever close to full employment, the increasing shortage of staff threatens to slam the brakes on an otherwise booming economy.”

He added: “The benign headline figures in today’s print will instantly be relegated to historical footnotes, but the increasing tightness it revealed in the US labour market could soon emerge from the shadows as the greatest roadblock to America's future growth.”