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Better than expected jobs report: a gain of 252K jobs in December. The unemployment rate fell to 5.6%,  lower than expected. Revisions add 50K jobs.. A disappointment came from a drop of 0.2% in average hourly earnings and y/y it’s only 1.7%. Will people get raises in January?  

The market reaction is choppy but the US dollar emerges as a winner: it is stronger, enjoying the headline numbers and ignoring the wage data for now.

More:  Has EUR/USD bottomed out? This pattern looks familiar

The US was expected to report an addition of 240K jobs in December, after an amazing 321K in November (before revisions). The unemployment rate carried expectations for a tick down to 5.7%. Average hourly earnings were  predicted to tick up to 2.2%  y/y.

The US dollar was marginally weaker towards the publication.

Data (updated)

  • Non-Farm Payrolls:  252K(exp. +2340K,  October saw 321K  before  revisions)
  • Participation Rate: 62.7%(62.8% last month )
  • Unemployment Rate: 5,6%  (exp.5.7%,  last month 5.8% before revisions)
  • Revisions:  +50K – October is now +18K higher to 261K, November up 32K to an amazing 353K(+44K  last month)
  • Average Hourly Earnings:  -0.2% m/m, 1.7% y/y big disappointment  (last month +0.4% m/m, 2.1% y/y  (exp. +0.2%)
  • Private Sector: 240K  (ADP showed a gain of +241K jobs).
  • Real Unemployment Rate (U-6): 11.2%  (previous: 11.4%).
  • Employment to population ratio: 59.2  (previous: 59.2%)
  • Average  workweek: 34.6  (last month: 34.6).

Analysis and currency reaction (updated)

  • EUR/USD traded  around 1.1813. Reports about the ECB QE options began emerging. After the release, the pair is down under 1.18.
  • GBP/USD around 1.5150. The pair bounced from the lows after the mixed  manufacturing data. The pair is down to 1.15120.
  • USD/JPY around 119.10. The pair is unable to settle above 120. A move towards 120 follows, with 119.54.
  • USD/CAD around 1.1815. Falling oil prices hurt, but one eye has to be kept for Canada’s job report. Canada lost jobs, and USD/CAD is up to 1.1870.
  • AUD/USD around 0.8150. OK data helped the pair escape the 0.80 abyss. The pair is relatively stable.
  • NZD/USD around 0.7815. Milk prices supported the pair. NZD/USD is relatively stable.

Quick analysis

  • The good: a  gain of over 300K jobs in total, including revisions,
  • The bad: a year over year gain of only 1.7% in wages – a significant setback. Wages must make a comeback in January or else the Fed could reconsider.
  • The ugly: the fluctuations of the  participation rate make the unemployment rate hard to read.

More:  3 reasons why US wages are set for a big rebound in January

Background

A moderation in job growth was expected in December after the surprisingly strong jump in November. However, a gain of 240K jobs is in line with the Jan-Nov average for 2014. The ISM reports disappointed in the headline, but were quite stable in the employment component, leaving expectations intact. ADP was positive.

There is a focus on wages. Can they rise? The Fed meets towards the end of the month but already stated that a rate hike is not on the cards before April, if not further on.

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