06 September 2021
7 mins clock icon

NFPs disappoint in August

By Daniel Richards

  • The UAE has announced new visa regulations and a plan to boost trade and economic links with Africa and Asia, part of a raft of new measures and initiatives expected this month to boost growth over the medium term.  New “green visas” will allow expatriates to apply to work in the UAE without an employer to sponsor them, and will allow children up to the age of 25 to be included as dependents of their parents, up from 18 years currently. People who have lost jobs will be allowed to remain in the UAE for up to six months, up from three months currently.
  • The UAE minister of economy Abdulla bin Touq announced that the UAE is seeking USD 13.6bn to be invested in the economy over the coming year, and that a total of USD 150bn be invested by 2030 according to Bloomberg.  The UAE will target investment from countries including Russia, Australia, China and the UK.  He also told Bloomberg that more than 30,000 jobs would be created over the next year and that he hoped the UAE’s growth would exceed 4% in 2021.   
  • The US non-farm payroll report for August came in well below expectations at the close of last week, following on from a similarly disappointing ADP report released two days previous. The headline NFP net gain was just 235,000, a sharp slowdown from the upwardly revised 10.5mn new jobs added in July, and far short of the consensus prediction of 733,000. This marked the slowest expansion in employment since January and given that there are a record number of open positions in the US at present this slowdown is likely an effect of the spread of the Delta variant across the country and the associated health concerns. Retail and hospitality, the sectors most likely to be affected by the virus, showed the weakest performance in the jobs report. It remains to be seen whether the upcoming end to some key federal coronavirus support schemes this week will prompt an uptick in hiring in September. The weak employment figures diminish the likelihood of any imminent tapering by the Federal Reserve at its upcoming meeting this month even as average hourly earnings expanded at a faster-than-expected 0.6% m/m. The headline U-3 unemployment rate fell to 5.2%, from 5.4% previously. Initial jobless claims for the week ending August 28 were 340,000, broadly in line with the previous week and consensus predictions.
  • US factory orders rose 0.4% m/m in July, down from 1.5% the previous month but still marginally stronger than expectations of 0.3% growth. On a y/y basis, growth was 18.0%, reflecting the ongoing strength in the economic recovery from last year, despite the indications that this recovery is slowing. Supply constraints related to the reopening continue to weigh on orders for products containing semiconductors such as computers and appliances, while primary metals and machinery fared well. Meanwhile, the July durable goods orders reading was confirmed at -0.1% m/m, unchanged from the initial print.
  • Turkish CPI inflation rose to 19.3% y/y in August, up from 19.0% the previous month and higher than consensus predictions of 18.8%. The monthly pace of price growth did slow, coming in at 1.1% compared to July’s 1.8% - but this was still higher than the consensus expectation of 0.7%. Food prices were a key driver of the continued acceleration in prices. The next TCMB meeting is scheduled for later this month, but the latest inflation print gives the central bank no leeway to cut rates given its stated commitment to maintaining a tight policy until inflation modifies. At present, with the benchmark one-week repo at 19.0%, real interest rates are already in negative territory. PPI inflation also accelerated last month, from 44.9% to 45.5%, suggesting that there is further pass-through to the consumer price basket to come.
  • Japanese Prime Minister Yoshihide Suga has declared that he will not run in his ruling Liberal Democratic Party’s upcoming leadership race, effectively meaning that he will be leaving office and paving the way for a new leader. Japanese markets rallied on the news, illustrating the fall in support the PM has experienced through recent months.

Today’s Economic Data and Events

10:00 Germany factory orders m/m, July. Forecast: -0.7%

US markets are closed for Labor Day

Fixed Income

  • The US Treasury curve bear steepened after the much weaker than expected August nonfarm payrolls number. Near-term yields remain anchored at low levels as the disappointing data will affirm market expectations that the Fed is in now rush to raise rates—yields on 2yr USTs fell almost 1bp over the week and were flat on the day to settle at 0.2061%.
  • Longer-run yields dropped on the immediate release of the jobs data but then quickly reversed and ended Friday higher—yields on 10yr USTs added almost 4bps on Friday to close at 1.3223%—as markets focus on the outlook for inflation, looking to the strong pace of wage growth from the August data. While it won’t have an immediate effect on the economy, the poor jobs numbers may also spur constructive debate on the Biden administration’s stimulus and infrastructure plans, also helping inflationary views in the market. The 2s10s curve bear steepened to almost 112bps, its steepest level since mid-August.
  • Emerging market bonds remain well supported even as the outlook for Fed rate moves remains clouded. Yields on 10yr Indian government bonds fell 10bps over last week to settle at 6.156% while Turkish government 10yr yields fell more than 26bps to 16.37% even as inflation remained high in August.
  • Central banks will be busy this week with the RBA setting policy on Sept 7th, the Bank of Canada on Sept 8th and the ECB meeting on the 9th of September. Russia is the standout among emerging markets, with the central bank there meeting on the 10th.


  • The US dollar extended its recent losing streak, declining for the second week in a row as the data flow seems to support the Federal Reserve’s reticence on raising rates any time soon. The DXY index fell 0.7% to 92.035 last week, its lowest level since the start of August.
  • Steady PMI numbers out of the Eurozone helped to support the single currency last week ahead of this week’s ECB meeting where the voices of policy hawks may grow a bit louder. EURUSD settled at 1.1880, up 0.7% on the week and the second weekly gain in a row. Among the other majors, the announcement of a change in leadership in Japan helped to actually strengthen the yen with USDJPY falling 0.12% last week to 109.71. Sterling strengthened over the course of the week, rising 0.8% last week to settle at 1.3871, benefitting from the decline in the dollar as there are few UK-specific drivers in play at the moment.
  • Commodity currencies were the other big gainers with USDCAD down by 0.8% last week and both AUD and NZD gaining more than 2% respectively.


  • The relatively weak jobs data out of the US on Friday was insufficient to derail what had largely been a risk-on tone in equity markets over the week. Modest losses at the end of the period saw the Dow Jones lose -0.2% w/w, but the NASDAQ ended 1.6% higher and the S&P 500 closed up 0.6% w/w, just off the record high set on Thursday.
  • Conditions were broadly positive in Europe, although there was a sell-off across the board on Friday which saw the composite STOXX 600 lose -0.1% over the week, with Germany’s DAX dropping -0.5%. Otherwise, the CAC (0.1%) and the FTSE 100 (0.2%) both closed higher w/w.
  • Developed markets were the weaker performers over last week, with the MSCI World Index closing up 1.0% while the MSCI Emerging Markets index added 3.4% w/w.
  • In Asia, Japan’s Nikkei was a major gainer, bolstered by the news regarding Prime Minister Yoshihide Suga’s decision not to run in his party’s leadership race. The index added 5.4% w/w, while the Shanghai Composite added 1.7% as some recent concerns there dissipated.


  • In a somewhat volatile week for oil markets, prices held relatively steady around recent levels. Brent futures settled nearly unchanged over the week at USD 72.61/b while WTI was bid up slightly to USD 69.29/b. However, the weekly close hid some wide intraday moves as the market absorbed the impact of Hurricane Ida in the US and the OPEC+ decision to maintain its strategy of adding 400k b/d in October at least.

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Written By

Daniel Richards Senior Economist

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