1. The Fed will now definitely tighten in September. They were already predisposed to tightening, but this latest report will ensure that the Fed confidently tightens. Ultimately, this means further increases in short term rates. The financial sector should benefit as their net interest margin increases.
2. The dollar will strengthen. This will make exports more expensive, so export intensive industries will continue to fight the increased dollar exchange rates. Companies that import significant amounts of their inputs will benefit.
3. Energy costs will drop. Oil is paid for with dollars abroad – and as the exchange rate increases, it will put downward pressure on oil prices.
4. Industries that require lots of trained labor are going to be under pressure. They face two unpleasant consequences: 1) they can’t find adequate numbers of employees and 2) they will have to increase wages to compete for these skilled workers.
5. Consumer Discretionary firms will benefit as consumers have more discretionary income. More people are employed and more people are making increased wages.Obviously, one employment report is not enough to generate all of these changes. But employment has been strong for over two years, and this cumulative effect will drive significant changes. This is one of those times where it is really important to stay on top of the economic reports. Your portfolio will benefit!