A big miss in the March NFP: a gain of only 126K in March. Revisions make it worse. Wages rise 0.3% m/m, with 2.1% y/y. This is the lowest since December 2013. The unemployment rate falls to 5.5% but with the participation rate falls to 62.7%.
The USD is down, with EUR/USD hitting 1.10 — more coming
The US was expected to gain around 245K jobs in March after 295K in February (before revisions). The unemployment rate was expected to remain unchanged at 5.5% and perhaps more importantly wages were expected to move up 0.2% m/m and stick above 2.2% y/y.
The US dollar was somewhat weaker towards the release, extending its falls from recent days.
More analysis: Economic weakness reaches jobs, but what will you buy instead of USD?
- Non-Farm Payrolls: 126K (exp. +250K,previously 295K before revisions)
- Participation Rate: 62.7% (62.8% last month )
- Unemployment Rate: 5.5% (exp.5.5%, last month 5.5% before revisions)
- Revisions: –69K: January -38K to 201K, February down 31K to 264K.(-18K last month)
- Average Hourly Earnings: +0.3% m/m, 2.1% y/y (exp. +0.2% m/m, last month +0.1% m/m, 2% y/y)
- Private Sector: 129K (ADP showed a gain of +189K jobs, but with a big positive revision).
- Real Unemployment Rate (U-6): 10.9% (previous: 11%).
- Employment to population ratio: 59.3%(previous: 59.3%)
- Average workweek: 34.6 (last month: 34.6).
Analysis and currency reaction (updated)
- EUR/USD traded above 1.09. Recent euro-zone data has been positive, but there are worries about Greece. EUR/USD hits a high of 1.1002
- GBP/USD traded around 1.4850. The countdown towards the general elections weighs on the pound. Cable rises above 1.49.
- USD/JPY traded around 119.50. The pair has been quite steady in range. The pair hits 119.
- USD/CAD was steady around 1.2550. CAD mostly enjoyed the weakness of the greenback and did not suffer the Iran deal. Dollar/CAD is around 1.25 now.
- AUD/USD managed to rise above 0.76 after hitting new multi-year lows as commodity prices fell. The Aussie is around 0.7640.
- NZD/USD around 0.7530. The kiwi is around 0.7580.
This is a bad report. The gain of 126K is very disappointing and so are the revisions. The fall in the real unemployment rate, the steady employment to population ratio and the OK wages do not compensate.
In order to remove the doubts, significant revisions are needed next month.
This NFP report is always important and it precedes the next Fed meeting in two weeks, in which no policy change is due. There were doubts about the urgency to hike and the pace of the hikes. This, together with weak economic data, weighed on the greenback. However, inflation and jobs which the Fed cares about most, were looking good, and this was a significant test.
The ADP report lowered expectations, and so did the ISM manufacturing PMI. However, there was a lot of uncertainty due to the absence of the services PMI. It is important to note that due to Good Friday, liquidity is extra thin.
And regarding wages, we certainly expected them to rise faster. Here are 3 reasons why wages should rise.