No jobs jobs were added during August in the US. This is below the 74K that was expected by economists. The unemployment rate remained at 9.1%, as expected. The chances of QE3 or any other special easing tools by the Fed are now higher. The dollar makes initial drops. This can reverse in this event, which is always characterized by high volatility.
EUR/USD began falling after an initial rise up to 1.4270, a bit higher than earlier and under the 1.4282 resistance line, it now reversed and is above the 1.4220 line. It is on the rise again. USD/JPY fell to 76.50 before ticking up, but it is lower. Also USD/CHF is lower.
Update: The trend has flipped indeed: The dollar is now gaining across the board. Is the greenback returning to its safe haven role? Currently it looks like part of the usual Non-Farm Payrolls volatility.
As this publication is critical for QE3 (dollar printing), the dollar is eventually expected to eventually react in a normal way to this release – falling against all currencies – without separate reactions for “risk” and “safe” currencies. Currently the reactions generally go in this direction, but are very limited.
This bad figure raises the chances of QE3 when the FOMC meets later in September. This is a very disappointing outcome. The “real unemployment rate”, U-6, ticked up from 16.1% to 16.2% – this includes the discouraged people. The strike in Verizon is responsible for -45K jobs, but even without the strike, the number would have been disappointing.
The figure for July was revised to the downside: from a nice gain of 117K initially reported to only 85K now. Average Hourly Earnings unexpectedly dropped by 0.1%. A rise of 0.2% was expected. This second tier figure could also help could also push Bernanke to ease – falling earning could be seen as deflationary.
The ADP report published two days ago, has shown a gain of 91K in the private sector, within expectations. The number seen now in this sector in the official report is only +17K. This is very weak and shows once again that the ADP report should be taken with a big grain of salt.
The overall picture in the US has worsened, but there were some positive figures during the month, leading up to positive expectations.
EUR/USD and GBP/USD weakened during the week, while USD/CHF fell and USD/JPY remained tight.
In any case, the release triggers strong moves and has its own characteristics. I recommend reading the 5 Notes for Trading the Non-Farm Payrolls.