Commentary on non-farm payrolls from Lachlan McPherson, Charles Schwab Australia

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Lachlan McPherson, Senior Investment Consultant at Charles Schwab Australia, said: “Job growth significantly missed market expectations, but 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.”

“The labour market remains fairly tight but risks to the economy are still present.

“While the possibility of a trade war is still top of mind for investors, it isn’t the only cause for concern. Investors are also closely watching the rising value of the US dollar, slowing global economic growth and the risk of the US Federal Reserve tightening short-term interest rates too quickly and dampening domestic economic growth.

However for now, the Fed has reiterated it has no plans to derail growth at this time.

Additionally, US companies have maintained strong balance sheets and tax reform has made it attractive to repatriate even more of their cash from foreign countries.

That money can support business investment, expansion and stock buybacks.

“The second-quarter earnings season will continue to provide a clearer look at both the health of the economy and the potential damage from trade jitters.

Investors should be watching for more cautious tones or any scaling back of capital spending plans and, as always, remain disciplined and diversified.”

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