Americans go into the Independence Day holiday with their economy back on the front foot
Dow smashes past 17,000 mark
US jobless rate falls to ’08 levels
Services reach a post-crisis peak
THE US recovery appears to be well and truly on track, with figures out yesterday revealing a soaring service sector and tumbling unemployment.
The Dow Jones Industrial Average broke through the 17,000 mark for the first time in its history, as morale soared before traders left work early to enjoy today’s Independence Day holiday. The index closed at a new record high of 17,068.26.
The dollar climbed 0.37 per cent against the euro and US government borrowing costs edged up as investors turned the risk switch back on.
“In the Hamptons today, a piece of pecan pie washed down with some chardonnay will taste like nectar!” enthused Panmure Gordon’s market analyst David Buik, observing the US jubilance from London.
The positive economic figures will put pressure on Janet Yellen and the rest of the Federal Reserve to accelerate the central bank’s plan to stop printing money, and could bring forward an interest rate hike.
An additional 288,000 new jobs were created in the private sector in June, marking the 52nd consecutive month of employment growth.
And the US unemployment rate dived to 6.1 per cent – the lowest level since mid-2008 and far outstripping expectations that it would hold steady at 6.3 per cent. Economists now expect the economy to grow by one per cent or more in each of the remaining quarters of the year.
Influential business surveys show the services sector growing at a healthy pace.
Markit’s purchasing managers’ index accelerated to 61 in June, the highest level since the survey began in 2009, and well above the 50 level which indicates no growth.
And the Institute for Supply Management’s rival index came in at 56 per cent, representing the 53rd consecutive month of growth in the dominant services sector.
Economists believe the strong uptick in growth will encourage Fed chair Yellen to soften her doveish stance and consider tightening policy sooner.
The Fed’s chair gave a speech on Wednesday vowing not to raise rates to tackle bubbles, but she might start to be influenced by the strength of the economy’s recovery.