The US gained 223K jobs in April, within expectations, but the data was mixed. The mixed data triggered a very mixed reaction in markets, with the dollar jumping up and down.
Diving into the details of the report, we can find more positives than negatives. Will the dollar rise after the dust settles? Here is the case, with three key reasons:
- Current data more important: Q1 was terrible, and the economy have even contracted, just like in 2014. This was also reflected in a dismal job gains in March: only 85K according to the revision seen in this report. That’s terrible. However, we already know that. The data for April is more important and we’re back to a 200K+ gain. This is also in line with the Fed’s message: Q1 weakness was transitory and the future looks brighter.
- Broad drop in unemployment: the drop in the headline unemployment rate to 5.4% could be dismissed – it came in as expected and we already learned to ignore it because of the weak participation. However, for a change, the participation rate is up and the jobless rate is down. This is excellent news. In addition, the broader U-6 real unemployment rate is down once again, to 10.8%, reaching new lows last seen before the crisis.
- Wage growth is picking up: the headline month over month number is poor: only 0.1%, but the year over year figure is better: 2.2%. A rise in wages, met by minimum wage hikes from McDonald’s and Walmart as well as rises in the Employment Cost Index, are also encouraging.
All in all, the positives have an advantage over the negatives. More importantly, the figures that matter most to the Federal Reserve are moving in the right direction.
What do you think?
More: 4 Reasons The USD Will Rebound – Keep The Faith – BNPP
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