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Quite a big disappointment: the US gained only 142K jobs in August. The immediate reaction is a drop of the US dollar. The unemployment  rate stands at 6.1% as expected. Revisoins are to the downside.  Another disappointment comes from the participation rate which slides back down to 62.8% points.

The US dollar is  lower but doesn’t go too far.

The US was expected to report a gain of around 230K jobs in August, after 209K in July (before revisions). The unemployment rate was expected to tick down to 6.1% the participation rate to stay around 62.9% and average hourly earnings to rise 0.2% m/m.

The US dollar was holding on to most of its gains towards the publication. EUR/USD was under 1.2955, GBP/USD under 1.63 and USD/JPY around 105.25.

Data (updated)

  • Non-Farm Payrolls:  142K  (exp. +230K,  July saw +209K  before revisions)
  • Participation Rate:  62.8%  (62.9% last month )
  • Unemployment Rate:  TBA  (exp. 6.1%,July  6.2% before revisions)
  • Revisions:  -28K  (+15K  last month)
  • Average Hourly Earnings:  +0.2%, 2.1% y/y(exp. +0.2%, July: 0.0%).
  • Private Sector NFP: TBA  (ADP showed a gain of +204K jobs).
  • Real Unemployment Rate (U-6): 12%  (previous: 12.2%).
  • Employment to population ratio: 59%  (previous: 59%)
  • Average  workweek: 34.5  (last month: 34.5).

Analysis and currency reaction (updated)

  • EUR/USD was under resistance of  1.2955, still suffering from Draghi’s blitz. The pair rose to 1.2985 but now retreats.
  • GBP/USD was carried lower on worries about Scotland, ECB and more, just under 1.63. Cable is now  just above  this round  number.
  • USD/JPY  traded around 105.25, lower than the new multi-year high. The pair slid  to 105 before stabilizing.
  • USD/CAD was stable  at 1.0875. The  C$ showed strength. Canada released its jobs report at the same time. Canada reported a disappointing loss of 11K jobs. The pair remains around the same area.
  • AUD/USD was strong around 0.9360, after having seen strong GDP earlier in the week.  It jumped to 0.94 before settling a bit lower.
  • NZD/USD was struggling under 0.83. The pair jumps and reached 0.8320.

Quick analysis

  • The good: a drop in the real unemployment rate U-6 to 12%, and a small rise in yearly average  hourly earnings to 2.1%.
  • The bad: the weak job gains of 142K and downwards revisions for a change.
  • The ugly:  a setback in the participation rate to 62.8% – lots of  slack for the Fed to ponder upon

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Pre-NFP Elliott Wave Analysis:  More USD strength after the NFP?  – The immediate answer is NO.

Background

While the ADP number was somewhat disappointing, encouragement came form the ISM Non-Manufacturing PMI: the important indicator for the services sector  rose to the highest level in 9 years, with the employment indicator also at a multi-year high. Also the manufacturing sector looks good.

The Fed convenes on September 17th and is set to taper for the last time, before a final end to QE in October. When will the first rate hike come? This is an open question, and this  report will certainly have a lot of impact.

The preview:  Trading the NFP with EUR/USD.