FXT Economic Data Summary (Asia-Pacific | 09/07)

US Labor Market Regains Resilience

The US labor market improved markedly in August, with nonfarm payrolls rising by 162,000, far above the 58,000 expected and sharply higher than Julys revised 21,000 gain. July was revised up from a 23,000 decline, while June was raised from 20,000 to 31,000, adding a combined 55,000 jobs to previous estimates. The three-month average increased to 71,000. Private payrolls rose by 127,000, led by 59,000 jobs in food services and 42,000 in local government education, while manufacturing and construction added 16,000 and 22,000 respectively.

The household survey was also solid. Unemployment held at 4.1%, while labor force participation rose from 61.4% to 61.6% and employment increased by 569,000. The U-6 underemployment rate fell from 7.9% to 7.7%, average hourly earnings rose 0.3% m/m and 3.1% y/y, and the average workweek increased from 34.3 to 34.4 hours. FXT believes the August rebound and upward revisions confirm continued labor-market resilience, reducing the need for further near-term Fed easing.

Canadian Employment Continues to Slow

Canadian employment fell by 41,700 in August, reversing Julys 75,100 increase and missing expectations for a 15,100 gain. Full-time employment dropped by 35,900 and part-time positions by 5,800, while the employment rate slipped from 60.9% to 60.8%. Unemployment remained at 6.4%, but the labor force contracted by 36,800 and participation eased from 65.1% to 65.0%, suggesting more weakness than the headline unemployment rate indicates.

Services employment declined by 51,500, including a 19,900 drop in business, building and other support services and an 8,800 decline in public administration. Goods-producing industries added 9,800 jobs, supported by a 22,100 increase in manufacturing. Average hourly wage growth also slowed from 2.8% to 2.0% y/y. FXT believes the decline in full-time jobs, participation and wage growth points to cooling momentum in Canadas labor market.

Eurozone Retail Sales Come Under Pressure

Eurozone retail sales fell 0.6% m/m in July, well below expectations for a 0.3% increase, while June was revised to a 0.2% gain. EU retail sales also reversed from a 0.2% increase to a 0.4% decline. On an annual basis, sales rose 0.6% in the Eurozone and 1.0% across the EU, with Eurozone growth slowing notably from 1.4% in June, signaling softer consumer momentum at the start of Q3.

Food, drinks and tobacco sales rose 0.4% m/m, while non-food sales fell 1.4% and automotive fuel dropped 0.8%. Retail sales declined 3.4% in Germany, 0.9% in Spain and 0.3% in Italy, while France recorded a 0.9% increase. FXT believes Eurozone households are becoming more cautious, with discretionary spending the main drag, although positive annual growth suggests a slowdown rather than a broad contraction in consumption.

RBNZ Maintains Tightening Bias

The Reserve Bank of New Zealand raised its Official Cash Rate for a second consecutive meeting, from 2.50% to 2.75%, although the pace of further tightening may slow. Assistant Governor Karen Silk said another hike is more likely in December than October as the central bank assesses the impact of previous tightening. Markets currently price around a 31% chance of an October hike, while a move to 3.00% by December is largely priced in.

A slower pace does not mean inflation risks have disappeared. The RBNZ expects headline inflation to remain around 3.9% by the end of 2026 and may not return to the 2% target midpoint until early 2028. Higher fuel and transport costs, recovering demand and sticky non-tradable inflation remain key risks. FXT believes the RBNZ is slowing the pace of tightening rather than changing direction, preferring to assess the effects of earlier rate hikes before taking further action.