Non-Farm Payrolls: 113K, Unemployment rate 6.6%, USD initially falls

The US gained 113,000 jobs in January. The unemployment rate stands at 6.6% – little changed from the previous month. The US Non-Farm Payrolls report was expected to show a gain of around 185K in the first month of 2014 after an initial report about 74K for December. Even though significant revisions were expected, there were only 34K jobs added in November and December than previously reported. The unemployment rate was expected to stand at 6.7%, which isn’t far off the current rate of 6.6%.

The report was expected to brush off worries for a weakening of the US economy and to show that bad weather was to blame for a one time slow job growth. But the recent report showed another slow month in the labor market.

The Data (updated)

• Non-Farm Payrolls:  113K  (December saw +74K  before revisions)
• Participation Rate: 63%  (62.8% last month )
• Unemployment Rate:  6.6%,  6.7% expected  (last month 6.7% before revisions)
• Revisions:  +34K in November and December,    (+38K in December)
• Private Sector NFP:  +142K  (ADP showed a solid gain of +75K jobs).
  
• Real Unemployment Rate (U-6):  13.5%(previous: 13.1%).
• Employment to population ratio: 58.8%  (previous: 58.6%)
• Average Hourly Earnings:  +0.2% gain,  +0.2% expected.
• Average  workweek:  34.4 hours  (Last month:  34.4 hours).

Market Reaction and Analysis

Soon after the report was released  EUR/USD rose by 0.13%  to 1.3607; moreover, the USD/JPY is currently trading down by 0.21% to reach 101.9. The lower than expected gain in the number of added jobs for the second month in a row doesn’t vote well for the progress of the U.S labor market. This slow down in the labor market could pressure down the USD against the Euro and Japanese yen during today’s trading. If the U.S employment continues to show little growth, it could keep dragging down the USD against leading currencies.

Towards the event, the euro got a boost from a confident ECB that denied deflation. AUD/USD also experienced a good week with a positive rate decision, and so did NZD/USD with the excellent job numbers. On the weaker side, we see the yen that lacked demand due to the lack of risk, CAD (which saw a release of its own job numbers) and the pound which got no love from the markets.

For reactions in gold, silver, oil and other commodities, see Trading NRG.

Background

The US needed an improved NFP of around 200K, similar to the trend seen until December’s report, to confirm that it is on track. In addition, a revision to the poor 74K report was also desired. Bad weather swept through the US in both December and January, but the week of the NFP survey was said to be a warmer one.

Data leading into the event was OK: ADP not only showed a normal gain in private sector jobs but also featured only a minor revision to December’s data. The ISM Non-Manufacturing PMI came out better than expected, including the employment component. The services sector is by far the largest in the US.

In any case, the FOMC seems determined to continue with tapering, and only a major disaster in the economy could make it reconsider. So, even a mediocre NFP could be OK.

More:  5 Notes for Non-Farm Payrolls Trading