Non-Farm Payrolls: +236K, Unemployment Rate 7.7% – Dollar Surges

The US gained 236K jobs in February, significantly above expectations. A good surprise also came from the unemployment rate that fell to 7.7%, better than no  change  at 7.9%. At first, expectations were for a gain of around +160K. Later on, a mix strong employment in the services sector, a strong ADP figure another drop in jobless claims pushed expectations to 192K.

The US dollar is now surging across the board. EUR/USD traded at around 1.31, below the highs and is now 70 pips lower at 1.3030. USD/JPY continued its surge and is now breaking higher to 96.30.

Updates:

•  EUR/USD breaks below 1.30 – approaches double bottom level.
• GBP/USD at fresh multi year lows, dips below 1.49

The Aussie and kiwi also retreated, but didn’t break  significant  levels. Gold fell sharply. Only the Canadian dollar gained against the greenback, thanks to an excellent jobs report in Canada.

The details

• Non-Farm Payrolls: +236K
• Participation Rate:  63.5% (63.6% last month)
• Unemployment Rate: 7.7% – this is the lowest since December 2008.
• Revisions: minor this time. A net of -15K.  December was revised from  +196,000 to  219,000,  and the change for January was revised from +157,000 to +119,000. Last month saw revisions of +127K.
• Private Sector NFP: +246K  (ADP showed +198K, above expectations)
  
• Real Unemployment Rate (U-6): 14.3% (previous: 14.4%)
• Employment to population ratio: 58.6%  (previous: 58.6%)
• Average Hourly Earnings: +0.2%, as expected.
• A big gain in construction jobs is one of the reasons for the big job gain.

Background

The previous months have seen stable gains of 150K+ jobs. What was different last month is that we saw huge positive revisions to previous data: an additional 127K jobs on top of the 157K job gain.

On the downside, there was some fear that the expiration of the payroll tax cut would be felt in February and would lower the result. On the other hand, the relatively late publication, on the 8th of the month, allowed data to pile up:

ISM Non-Manufacturing PMI rose to 56 points, with a strong employment component of 57.2. ADP Non-Farm Payrolls rose by 198K, beyond expectations. And for a change, it contained an upwards revision of the previous month. And finally, jobless claims stood on 344K – around the “support line”.

EUR/USD was on high ground after the positive ECB press conference, but seemed vulnerable. USD/JPY surged higher after breaking 95 in a move that seemed too strong and could lead to profit taking on USD/JPY,  no matter the actual outcome.