US Non-Farm Payrolls for September rose by only 148K, less than expected. They were expected to show a gain of around 180K jobs after a gain of 169K jobs in August (before revisions). The unemployment rate dropped to 7.2%. It was expected to remain unchanged at 7.3%. The participation rate is key to the unemployment rate. The release was delayed by 18 days due to the government shutdown. While it is somewhat stale and doesn’t reflect the impact of the political crisis, the NFP is always the NFP.
Currency markets were very stable before the release. EUR/USD traded around 1.3670, GBP/USD hung above 1.6130 and USD/JPY was above 98.30. EUR/USD broke to a new 2013 high of 1.3740, breaking resistance at 1.3710, GBP/USD just under 1.62, USD/JPY below 98.
- Non-Farm Payrolls: +148K, below expectations (169K in August before revisions)
- Participation Rate: 63.2%(63.2% last month, lowest since 1978)
- Unemployment Rate: 7.2% (last month 7.3% before revisions)
- Revisions: Total: +9K, marginal. August revised up to 193K, July down from 104K to 89K. . Last month saw a big downwards revision of 74K.
- Private Sector NFP: +126K (ADP showed a gain of 166K)..
- Real Unemployment Rate (U-6): 13.6%(previous: 13.7%).
- Employment to population ratio: 58.6 (previous: 58.6%)
- Average Hourly Earnings: +0.1%, below 1+0.2% expected (last month: +0.3%, revised up from 0.2%).
- Average workweek: 34.5 (Last month: 34.5 hours).
Market Reaction and Analysis
The report isn’t a total disaster: the outcome is below expectations, but not too bad. The unemployment rate fell without a drop in the participation rate.
However, the euro seized the opportunity and broke to new highs. Also the Swiss franc is in the same position.
A technical view: EUR/USD at 11 month highs – where next?
More analysis: Why QE Tapering isn’t likely until April 2014 – the Tapril?
- Before / After / Comments
- EUR/USD 1.3670 / 1.3740 / New 2013 high for EUR/USD. The break is convincing.
- GBP/USD 1.6135 / 1.6195 / Higher, but no new highs.
- USD/JPY 98.35 / 97.95 / The 98 line has been fought over recently. The yen should gain more on US worries.
- AUD/USD 0.9660 / 0.97 / Aussie continues showing strength.
- NZD/USD 0.8450 / 0.85 / The kiwi continues its gradual rise.
- USD/CAD 1.0295 / 1.0285 / Canada needs a strong US. There, it doesn’t gain much.
- USD/CHF 0.9030 / 0.8975 / Big breakout for the pair
Towards the original release date of October 4th, there was still some talk in the market about an Octaper – a reduction of bond buys in the Fed’s meeting on October 30th. ADP was OK and also other data showed an ongoing economic recovery.
The government shutdown had a big impact: not only was the data delayed, leaving the Fed blind. And not only was the economy damaged during these 16 days. The worst outcome is the resolution: a recipe for another crisis in early 2014. With this background, data needs to be extraordinary in order to facilitate a QE tapering announcement in December,