The S&P 500 slid to the intraday highs of September 2, while Bitcoin (BTC) climbed to its highest level in more than three months. The moves came after a key September 3 report showed the US economy was creating fewer jobs than expected, reducing the likelihood that the Federal Reserve will begin rolling back its stimulus package this year.
The US Bureau of Labor Statistics announced that the number of non-farm employees (NFPs) rose 235,000 in August, up from expectations of 733,000 jobs. Nevertheless, the unemployment rate fell from 5.4% in the previous month to 5.2%.
OUCH! The US economy is only creating 235,000 jobs versus an expected 733,000, the slowest increase in 7 months amid the delta surge. At least the previous month was increased from 943k to 1053k. As expected, the unemployment rate will drop to 5.2%. The average hourly wage was above expectations and increased by 0.6% MoM compared to + 0.3% expected. pic.twitter.com/gQJHLAb54Z
– Holger Zschaepitz (@Schuldensuehner) September 3, 2021
Delta variant FUD behind Bitcoin pump?
There was no job growth in the hospitality and leisure sector in August, compared to an average increase of 350,000 jobs per month over the last six months. Meanwhile, the restaurant sector has lost 42,000 jobs, signaling fears about the rapidly spreading delta variant of COVID-19.
Bitcoin surged 3.41% to $ 50,961 in anticipation that a slowdown in the U.S. labor market would cause the Federal Reserve to cap its taper tantrum.
Bitcoin 1 hour candle chart. Source: TradingView.com
The world’s most famous cryptocurrency struggled in the second quarter of 2021 amid a global economic recovery from the pandemic. It fell from around $ 65,000 to under $ 30,000 after facing additional headwinds from a sweeping crypto ban in China and Elon Musk’s anti-Bitcoin tweets.
At the same time, the global economic recovery sparked speculation that central banks would withdraw their massive monetary policy support. In the US, Federal Reserve Chairman Jerome Powell said the Fed would begin throttling by the end of 2021, when the economy hits “maximum employment.”
However, the delta variant continues to cloud hopes for a steady recovery in the economy and the labor market. Additionally, September 3 job data suggests the US Federal Reserve must continue its $ 120 billion monthly asset purchase program.
The outlook put the dollar on the downside and pushed unprofitable hedging assets like bitcoin and gold higher.
Daily chart of the Bitcoin price vs. spot gold (XAU / USD) and the US dollar index (DXY). Source: TradingView
“The cross-over of the $ 50,000 mark made two crucial discoveries for the digital currency,” said Petr Kozyakov, co-founder and CEO of the Mercuryo payments network.
“On the one hand, the leading cryptocurrency still has the inherent properties that attract investors and buyers, and second, the increased price valuation has not yet eliminated the volatility that surrounds the digital asset.”
Kozyakov believed that loose monetary policy coupled with the growth of Bitcoin as a recognizable financial asset on Wall Street would push its prices down to $ 55,000 in the short term and to $ 70,000 in the long term.
Unemployment benefit is about to expire
The extremely weak NFP report came just days before the planned end of federal unemployment benefits, which the U.S. government introduced to cushion the economic damage caused by the pandemic.
In addition, the additional aid that gives unemployed Americans $ 1,200 a month will expire on September 6th. This will effectively cut aid to approximately 7.5 million people as cases of delta variants increase in parts of the United States.
Goldman Sachs found that unemployment benefits also kept Americans from applying for jobs throughout July. The banking giant predicted that the September 6 termination would increase the number of non-farm workers to 1.5 million by the end of 2021.
The next meeting of the Federal Reserve will take place in mid-September and should shed more light on the Fed’s taper plans in light of the weaker NFP report.
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