Very weak jobs report: only 98K jobs gained, much worse than expected. This comes on top of a downwards revision. Wages are up 0.2% m/m and 2.7% y/y. 38K jobs were lost in revisions. But the unemployment rate is down to 4.5%, better than expected and with a stable participation rate at 63%. Also the U-6 underemployment rate is falling nicely to 8.9%, so there are silver linings in this NFP.
One interpretation is that the US economy nears full employment. In such an environment, job gains slow down as there are less available employees to hire, but their wages rise. Looking at the chances for a rate hike in June, these are down from 70% to 61%: lower, but still pointing to a raise in rates.
The US dollar is falling but after the initial fall, the silver linings emerge and the dollar stabilizes.
Analysis: NFP: The Good, the Bad and the Ugly
The United States was expected to report a gain of around 180K jobs in the month of March. Wages were predicted to rise by 0.2% m/m and the unemployment rate was expected to remain unchanged at 4.7%.
Currencies were stuck in ranges ahead of the publication, with a significant distraction from the US airstrikes in Syria.
The preview: trading the NFP with EUR/USD
March 2017 NFP Data (updated)
- Non-Farm Payrolls: Only 98K (exp. +180K, last 235K before revisions)
- Average Hourly Earnings 0.2% m/m, 2.7% y/y (exp. +0.2% m/m, last month 0.2% m/m, 2.8% y/y)
- Revisions: -39K, with February revised down to 219K (+9K last time).
- Participation Rate: 63% (63% last month )
- Unemployment Rate: 4.5% (exp.4.7%, last month 4.7%)
- Private Sector: 89K (ADP showed 263K).
- Real Unemployment Rate (U-6): 8.9% (previous: 9.2%).
- Employment to population ratio: 60.1% (previous: 60%)
- Average workweek: 34.3 (last month: 34.4).
NFP Currency Reaction – USD is down
- EUR/USD was around 1.0630, marking a triple bottom on Draghi’s dovishness. EUR/USD escapes support at 1.0630, rising to 1.0666 before slipping back to 1.0640.
- GBP/USD was trading lower, around 1.2430. Weak trade balance data hurt the pound, offsetting a strong services sector report. Cable is up to 1.2450.
- USD/JPY reacted to the airstrikes in Syria with a drop towards 110 but jumped from there. The pair got closer to 110, hitting a low of 110.09. This is a tough nut to crack.
- USD/CAD traded just under 1.34, with the Canadian dollar enjoying stronger oil prices. At the same time, Canada published its own jobs report. Canada’s jobs report beat expectations and USD/CAD is down to 1.3360.
- AUD/USD traded around 0.7520, at the lower end of the range. There is no material change here.
- NZD/USD traded under 0.70, hugging the round level. The kiwi has not moved too much.
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