Non-Farm Payrolls beat expectations: 271K and higher wages —

A very strong US jobs report: A gain of 271K.  Wages grew at a faster rate. It’s mostly positive albeit with little upward revisions — an upside of 12K. The unemployment rate slid to 5%. Participation is at 62.4% — unchanged. Y/y wages are at 2.5% — the fastest pace since July 2009. 

USD is heavily bought as this is a strong report on many fronts. EUR/USD falls by  more than 120 pips.

The jobs report for October was expected to show a gain of around 180K, a drop of the unemployment rate to 5% and a rise of 0.2% in wages m/m.

Data (updated)

• Non-Farm Payrolls:  271K (exp. +180K, previously 142K before revisions)
• Participation Rate: 62.4%(62.4% last month )
• Unemployment Rate: 5% (exp.5%, last month 5.1% before revisions)
• Revisions: +12K (-59K last month)
• Average Hourly Earnings: +0.4% m/m and 2.5% y/y(exp. +0.2% m/m, last month 0.2% m/m, 2.2% y/y)
• Private Sector: TBA (ADP showed +182K).
• Real Unemployment Rate (U-6): 9.8% (previous: 10%).
• Employment to population ratio: 59.3% (previous: 59.2%)
• Average workweek: 34.5 (last month: 34.5).

Analysis and currency reaction (updated)

It’s important to note that the euro and the yen sharply fall against the USD;  GBP and commodity currencies also trade down. 

• EUR/USD traded at 1.08634. And the pair is currently trading around 1.0713 following this news. This pair could keep sliding as this report prompts purchases of the USD.
• GBP/USD trades close to 1.5043.
• USD/JPY pair  is up around 122.77 — a gain of close to 200 pips for the day.
• USD/CAD trades around 1.3265.

This report brings the Federal Reserve a bit closer towards raising its cash rate in the December meeting, which could further boost the greenback. The higher growth in wages, strong gain in jobs, and modest fall in unemployment could suggest the labor market is ready for a Fed rate hike.

Background

Predictions were high for a recovery this month after two weak ones. The expectations were fueled by an OK ADP figure and also a blockbuster ISM Non-Manufacturing PMI with a strong employment component.

Also according to recent Fed musings, one could have expected for a positive outcome. However, there was no certainty.

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