Lower than expected data in the US: only 156K jobs were gained and wages went up by 0.1%, lower than expected on both fronts.The participation rate was unchanged at 62.9%. Wages y/y are still at an annual pace of 2.5%. Overall, not a great report on both wages and headline job growth.
The US dollar is reacting to this news as its slides against the majors including the Euro and Yen — the dollar weakness returns. Following the immediate reaction, however, the selloff of the USD has eased down and is leveling off against the Euro and Yen.
Expectations: The US was expected to report a gain of around 180K jobs in August after 209K in July (before revisions). Wages were expected to rise 0.2% after 0.3% and they remain key. This jobs report has all the ingredients of providing action. See: Why this NFP could be very volatile – 5 reasons
August 2017 NFP Data (updated)
- Non-Farm Payrolls: 156K (exp. +180K last 209K before revisions)
- Average Hourly Earnings 0.1% (exp. +0.2% m/m, last month 0.3% m/m, 2.5% y/y)
- Revisions: -41K(+2K last time).
- Participation Rate: 62.9% (62.9% last month )
- Unemployment Rate: TBA (exp.4.3%, last month 4.3%)
- Private Sector: 77K (ADP showed 237K).
- Real Unemployment Rate (U-6): 8.6%(previous: 8.6%).
- Employment to population ratio: 60.1% (previous: 60.2%)
- Average workweek: 34.4 (last month: 34.5).
NFP Currency Reaction
The US dollar began the week on the back foot, with a deep dive of USD/JPY and EUR/USD breaking above 1.20. However, the greenback made a comeback, partially thanks to a robust GDP read of 3%.
But following this recent NFP report the immediate reaction was a drop in the USD across the board.
- EUR/USD is ticking up to around 1.19290 following the news — a gain of less than 0.2%;
- GBP/USD is trading around 1.2978 withing minutes after the report came out — the pound is also benefiting from the weak jobs report;
- USD/JPY is nearing the 110 mark. .
- USD/CAD is around 1.2360 — a big leg up for the CAD against the USD — nearly 1% — as a reaction to this news.
- AUD/USD is getting closer to 0.80.
We only had one early indicator, the ADP report, and it was certainly positive. The firm reported a gain of 237K private sector jobs in August, better than expected and accompanied with an upwards revision. The ISM PMIs are released only after the NFP, which is released early in the month.
This Non-Farm Payrolls report will not change the direction of the Fed for September. Yellen and co. are expected to begin reducing their balance sheet. What about rate hikes? The data feeds into the next decision, but that is set to take place only in December.