Strong Non-Farm Payrolls: +203K, unemployment rate 7% – USD jumps



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

Background

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.


About

Yohay Elam – Founder, Writer and Editor

I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me.

Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

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