Non-Farm Payrolls beat expectations: 271K and higher wages —

A very strong  US jobs report: A gain of 271K.  Wages grew at a faster rate. It’s mostly  positive albeit  with  little upward revisions — an upside of 12K. The  unemployment rate slid to  5%. Participation is at 62.4% — unchanged. Y/y wages are at 2.5% — the fastest pace since July 2009.  

USD is heavily bought  as this is a strong  report on many  fronts. EUR/USD falls by  more than 120  pips.

The jobs report for October was expected to show a gain of around 180K, a drop of the unemployment rate to 5% and a rise of 0.2% in wages m/m.

Data (updated)

• Non-Farm Payrolls:  271K  (exp. +180K, previously 142K  before revisions)
• Participation Rate: 62.4%(62.4% last month )
• Unemployment Rate: 5%  (exp.5%,  last month 5.1% before revisions)
• Revisions: +12K  (-59K last month)
• Average Hourly Earnings: +0.4% m/m and 2.5% y/y(exp. +0.2% m/m, last month 0.2% m/m, 2.2% y/y)
• Private Sector:  TBA  (ADP showed +182K).
• Real Unemployment Rate (U-6): 9.8%  (previous: 10%).
• Employment to population ratio: 59.3%  (previous: 59.2%)
• Average  workweek: 34.5  (last month: 34.5).

Analysis and currency reaction (updated)

It’s important to note that the euro and the yen sharply fall against the USD;   GBP and commodity currencies also trade down.  

• EUR/USD traded at 1.08634. And the pair is currently  trading  around 1.0713  following this news. This  pair could keep sliding as this report  prompts  purchases  of the USD.
• GBP/USD trades  close to  1.5043.
• USD/JPY pair  is up around  122.77  — a gain of close to 200  pips for the day.
• USD/CAD  trades around 1.3265.

This report brings the Federal Reserve a bit closer towards raising its cash rate in the December meeting, which could further boost the greenback. The higher growth in wages, strong gain in jobs, and modest fall in unemployment could suggest the labor market is ready for a Fed rate hike.

Background

Predictions  were high for a recovery this month after two weak ones. The expectations were  fueled by an OK ADP figure and also a blockbuster ISM Non-Manufacturing PMI with a strong employment component.

Also according to recent Fed musings, one could have expected for a positive outcome. However, there was no certainty.

Preview:  Trading the NFP with EUR/USD