The rising unemployment rate in the United States is likely to have significant ripple effects in Kenya, according to HFM Market analysts.
HFM market analyst Dennis Mwenga indicated that the US Federal Reserve is expected to cut interest rates in September to stimulate job creation, which could lead to a depreciation of the US dollar.
Consequently, world currencies, including the Kenyan shilling, may gain slightly against the dollar due to its sell-off.
“What investors are looking for are the jobs created and the effect that they have on investment. Data that has been coming out shows that unemployment in the US has been ticking up, which has effects on the interest rates,” he said.
On Friday, the US Non-Farm Payrolls (NFP) report revealed that the US unemployment rate climbed to 4.3% in July, up from 4.1% in June.
Meanwhile, the labor force participation rate slightly increased to 62.7% from 62.6%. Despite these figures, the US economy added 206,000 jobs in July, following a 218,000 expansion in June.
However, average hourly earnings narrowed to 3.9% from 4.1% during the same period, marking the lowest reading since June 2021.
The potential cut in interest rates by the US Federal Reserve is seen as a move to counteract the rising unemployment rate and to boost job creation.
This monetary policy change is anticipated to result in a weaker dollar, offering a temporary reprieve for other world currencies, including the Kenyan shilling.
Kenyan investors and businesses are closely monitoring these developments, as fluctuations in the US economy can have direct and indirect impacts on the Kenyan market.
The anticipated depreciation of the dollar could make imports cheaper and improve the balance of trade for Kenya, but it could also affect export competitiveness and foreign investment flows.
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