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Less job growth than expected: only 173K in August, but revisions are positive, 44K and so are wage gains, +0.3% m/m and 2.2% y/y. The  unemployment rate is down to 5.1%.

After the  initial drop, the dollar is up.

The US was expected to create around 220K jobs in August. The unemployment rate was  predicted to drop to 5.2% and wages carried expectations for +0.2% m/m. This is a  critical report for the Fed’s  dilemma later this month: to hike or not to hike.

Currencies were tense towards the publication. — lots more coming —

Data (updated)

  • Non-Farm Payrolls:  173K    (exp. +222K, previously 215K  before revisions)
  • Participation Rate: 62.6%  (62.6% last month )
  • Unemployment Rate: 5.1%  (exp.5.2%,  last month 5.3% before revisions)
  • Revisions: +44K: June from 231K to 245K and July from 215K to 245K  (+14K last month)
  • Average Hourly Earnings: +0.3% m/m, 2.2% y/y  (exp. +0.2% m/m, last month 0.2% m/m, 2.1% y/y)
  • Private Sector: 140K  (ADP showed only +190K).
  • Real Unemployment Rate (U-6): 10.3%  (previous: 10.4%).
  • Employment to population ratio: 59.4%  (previous: 59.3%)
  • Average  workweek: 34.6  (last month: 34.6).

Analysis and currency reaction (updated)

Analysis:  Fed likely to hike in September with big sweeteners – 7 reasons

  • EUR/USD traded around  1.1140, up  a bit after the blow from Draghi. It jumped to 1.1190 but fell below 1.11 afterwards.
  • GBP/USD was at 1.5230. It is hitting the  lower end of the 1.52 handle.
  • USD/JPY traded around  119.15, pushing lower. The pair is now lower. Risk aversion? Below 119.
  • USD/CAD was around 1.3230, with its own jobs report in Canada. This one is at 1.32, thanks to a good Canadian jobs report.
  • AUD/USD traded around  0.6980 after another  worry about China. The Aussie initially rose above 0.70 but then fell to a new 6 year low at 0.6957  before stabilizing a bit higher.
  • NZD/USD  was around 0.6370 and now at 0.6355.

Background

This is a very important report. The Fed is data dependent and the door is open for a rate hike in September. So to put is simply: a good report implies a rate hike and a bad one delays it. We will hear from the Fed on September 17th. There are other factors of course: positive US data of late (GDP upgrade, strong  durables) vs. the global slowdown and the fall in stock markets.

Data leading to the event was mixed: ADP and ISM Manufacturing PMI both missed but the ISM Non-Manufacturing PMI (services sector) beat expectations. In addition, August’s numbers usually miss in the initial read only to be revised up later on, so this adds another layer of complication.

The preview:  EUR/USD: Trading the US Non-Farm Payrolls