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.
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