Non-Farm Payrolls fall by 33K – wages up 0.5% –

The US jobs report is totally off the charts: a drop, yes a drop of 33K jobs. This hasn’t happened in quite some time. On the other hand, wages are leaping 0.5%, which is great and wages are up 2.9% y/y. The unemployment rate is down to 4.2%, the lowest since 2001 (yes, 16 years), scratching the bottom of the barrel.  

The US dollar is on the rise due to wages, including the upward revision for August, but the reaction is choppy as the numbers seem totally skewed by Hurricane Irma.

The US economy was expected to gain around 80K jobs in September after 156K in August (before revisions). The unemployment rate was projected to remain at 4.4% and  wages were forecast to rise by 0.3% after 0.1% beforehand. The hurricanes lowered expectations. Preview:  Trading the NFP with EUR/USD: an upside-down V-shaped graph?

The US dollar was looking good ahead of the publication

September 2017 NFP Data (updated)

• Non-Farm Payrolls:  -33K  (exp. +80K, last 156K before revisions)
• Average Hourly Earnings  +0.5%, 2.9% y/y. The previous y/y was revised up to 2.7%    (exp. +0.3% m/m, last month 0.1% m/m, 2.5% y/y)
• Revisions: ’38K  (-41K last time).
• Participation Rate:63.1%      (62.9% last month )
• Unemployment Rate: 4.4%  (exp.4.4%,  last month 4.4%)
• Private Sector: -40K    (ADP showed 135K).
• Real Unemployment Rate (U-6):8.3%  (previous: 8.6%).
• Employment to population ratio: 60.4%    (previous: 60.1%)
• Average  workweek: 34.4  (last month: 34.4).

NFP Currency Reaction

The US dollar began the week on the back foot, with a deep dive of USD/JPY and EUR/USD breaking above 1.20. However, the greenback made a comeback, partially thanks to a robust GDP read of 3%.

But following this recent NFP report, the immediate reaction was a drop in the USD across the board.

• EUR/USD was struggling to  hold onto 1.17. The crisis in Catalonia weighed on the pair and so did the dovish comments from the ECB; The pair is now down to 1.1680 with a low of 1.1669.
• GBP/USD was around 1.3075. Doubts about the PM and stalled Brexit talks hurt Sterling. The pair is at 1.3040. Will 1.30 break?
• USD/JPY was flirting with 113 amid preparations for Japan’s elections. It reaches 113.30.
• USD/CAD was trading under 1.26. Canada awaited its own jobs report which was quite mixed.
• AUD/USD was down under 0.78 amid talk of a rate cut in Australia. The pair is down to 0.7750.

NFP Background

The hurricanes that devastated the US had already skewed weekly jobless claims and were expected to hit the jobs report as well. However, wages carried the opposite expectations: a recovery after last month’s poor number.

All in all, the Fed still wants to raise rates in December and the bar seems high for a change of heart.