The US Non-Farm Payrolls report showed a nice gain of 203K, above expectations. It was expected to show a gain of 180K jobs after an initial report of 204K in October. The unemployment rate was expected to tick down from 7.3% to 7.2% and here we have a big surprise of only 7%. This NFP report is critical for the Fed decision on QE tapering in December 18th, the potential “Dectaper”. With a lower unemployment rate on the background of a higher participation rate and no big revisions, the “Dectaper” seems closer.
Towards the publication, EUR/USD traded on high ground at 1.3655 and dipped to 1.3620, GBP/USD was stable around 1.6340 and now at 1.6310, and USD/JPY was around 102.30 and is climbing to 102.60.
The Data (updated)
- Non-Farm Payrolls: +203K (October saw +204K now revised to +200K)
- Participation Rate: 63% (62.8% in October, which seemed distorted )
- Unemployment Rate: 7.0%, 7.2% expected (last month 7.3% before revisions)
- Revisions: +8K (+12K in September, -4K for October) after a strong +60K in October)
- Private Sector NFP: 196K (ADP showed a strong gain of 215K)..
- Real Unemployment Rate (U-6): 13.2% (previous: 13.8%).
- Employment to population ratio: 58.6 (previous: 58.3%)
- Average Hourly Earnings: +0.2%, +0.2% expected.
- Average workweek: 34.5 (Last month: 34.4 hours).
More data: Personal spending was expected to rise by 0.3%, personal income by 0.3% and the Core PCE Price Index by 0.1%.
Market Reaction and Analysis
- NFP Analysis: 5 reasons for Dectaper
- More: Better than expected US non-farms should be the catalyst for a stronger dollar
- And another view: Odds improve for Dectaper
- Before / After / Comments
- EUR/USD 1.3655/ 1.6330 / The euro got a boost from Draghi’s “Merry Christmas” message.
- GBP/USD 1.6340/ 1.6310 / Cable suffered from two shooting stars despite mostly good data.
- USD/JPY 102.30 /102.60 / Talk of more stimulus weakened the yen recently
- AUD/USD 0.9060/0.9015 / The Aussie bounced off critical support.
- NZD/USD 0.8190/ 0.8160 / The kiwi showed some resilience lately.
- USD/CAD 1.0640 / Canada released better than expected employment data at the same time.
- USD/CHF 0.8950 / 0.8980 / The franc rode higher on the euro’s strength.
Data leading up to the event were mostly positive: ADP showed a big rise in private sector jobs, 215K. ISM Manufacturing PMI exceeded expectations, including a strong employment component, jobless claims dropped below 300K, but the ISM Non-Manufacturing PMI disappointed and so did its employment component. If it weren’t for the services sector number, expectations would have risen from the official 180K to above 200K.
The Fed said that removing some stimulus depends on the data, and this naturally makes this event important. Expectations for a “Dectaper” began rising again after some nice data points that showed that the government shutdown had a relatively small effect on the economy. More importantly, the Fed managed to separate the concept of QE tapering from a potential hike in short term interest rates. This is the real reason that could lead to QE tapering.