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Excellent jobs report: 248K gained in the US. Unemployment rate 5.9% (lowest since 2008) but a drop in the participation rate to 62.7% – new multi-decade low. Revisions add 69K jobs.

The USD is on the rise. EUR/USD is at a new 2 year low and GBP/USD is also at a new cycle low. Gold is crashing as well.

The US was expected to report a gain of 215K jobs in September after a disappointing 142K in August, before  revisions. The unemployment rate was expected to remain unchanged at 6.1%. Average hourly earnings were expected to rise again by 0.2% m/m. Last month saw 2.1% y/y.

EUR and GBP were on the back foot before the publication.

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Data (updated)

  • Non-Farm Payrolls:  248K  (exp. +215K,  August saw 142K  before revisions)
  • Participation Rate:  TBA  (62.8% last month )
  • Unemployment Rate:  5.9%  (exp. 6.1%,  last month  6.1% before revisions)
  • Revisions:  +69K  (-28K  last month)
  • Average Hourly Earnings:  0% very disappointing  (exp. +0.2%, last month +0.2% m/m, 2.1% y/y)
  • Private Sector 236K  : TBA  (ADP showed a gain of +213K jobs).
  • Real Unemployment Rate (U-6): 11.8% good news  (previous: 12%).
  • Employment to population ratio: 59%  (previous: 59%)
  • Average  workweek: 34.5  (last month: 34.5).

Analysis and currency reaction (updated)

  • EUR/USD was sliding towards 1.2610, sliding from the Draghi boost. It fell to a  new 2 year low at 1.2534.
  • GBP/USD was on the back foot around 1.6070  on weak services PMI. The pair is hardly clinging onto 1.60.
  • USD/JPY climbed towards 109. It is around 1.0940 after the publication.
  • USD/CAD traded around 1.1180. Canadian trade balance was published at the same time. The pair broke resistance at 1.1225  but could not hold to its ground.
  • AUD/USD traded around 0.8750, quite steadily. It is down to 0.8720.
  • NZD/USD was  trading around 0.7850, also steadily. It is down to 0.7820.

Quick analysis

  • The good: Big gain in jobs and revisions show that August was a one off. It is surrounded by strong gains in July and September, and now  August is +180K. In addition, the “real unemployment rate” is down again, to 11.8%.
  • The bad  Wage growth is flat once again, and annual wage inflation remains at 2%, around the levels of inflation and not more. This is fuel for the Fed doves. However, wages rise after jobs increase, the same as jobs increase after growth  returns. Early in 2015, after annual pay rises, we could see this figure rise.
  • The ugly: the  participation rate cracked the bottom, that was guarded for a long time. 62.7% was least seen in 1978 and this low participation rate basically makes the unemployment rate a nice headline but nothing more.

Background

After August’s big disappointment, a good number today and/or a significant revision to August are needed to show this was a one off and not a change in the recovery course of the US economy.

The US dollar rallied hard in September, but in the wake of October, a streak of weak figures eventually triggered a correction. The next move significantly depends on this release.

In our latest podcast, we  discuss the big events for October:

Download it directly here.

Subscribe to our podcast  on iTunes.