Less job growth than expected: only 173K in August, but revisions are positive, 44K and so are wage gains, +0.3% m/m and 2.2% y/y. The unemployment rate is down to 5.1%.
After the initial drop, the dollar is up.
The US was expected to create around 220K jobs in August. The unemployment rate was predicted to drop to 5.2% and wages carried expectations for +0.2% m/m. This is a critical report for the Fed’s dilemma later this month: to hike or not to hike.
Currencies were tense towards the publication. — lots more coming —
Data (updated)
- Non-Farm Payrolls: Â 173KÂ Â (exp. +222K, previously 215KÂ before revisions)
- Participation Rate: 62.6%Â (62.6% last month )
- Unemployment Rate: 5.1% (exp.5.2%, last month 5.3% before revisions)
- Revisions: +44K: June from 231K to 245K and July from 215K to 245KÂ (+14K last month)
- Average Hourly Earnings: +0.3% m/m, 2.2% y/y (exp. +0.2% m/m, last month 0.2% m/m, 2.1% y/y)
- Private Sector: 140KÂ (ADP showed only +190K).
- Real Unemployment Rate (U-6): 10.3%Â (previous: 10.4%).
- Employment to population ratio: 59.4%Â (previous: 59.3%)
- Average workweek: 34.6 (last month: 34.6).
Analysis and currency reaction (updated)
Analysis: Fed likely to hike in September with big sweeteners – 7 reasons
- EUR/USD traded around 1.1140, up a bit after the blow from Draghi. It jumped to 1.1190 but fell below 1.11 afterwards.
- GBP/USD was at 1.5230. It is hitting the lower end of the 1.52 handle.
- USD/JPY traded around 119.15, pushing lower. The pair is now lower. Risk aversion? Below 119.
- USD/CAD was around 1.3230, with its own jobs report in Canada. This one is at 1.32, thanks to a good Canadian jobs report.
- AUD/USD traded around 0.6980 after another worry about China. The Aussie initially rose above 0.70 but then fell to a new 6 year low at 0.6957 before stabilizing a bit higher.
- NZD/USDÂ was around 0.6370 and now at 0.6355.
Background
This is a very important report. The Fed is data dependent and the door is open for a rate hike in September. So to put is simply: a good report implies a rate hike and a bad one delays it. We will hear from the Fed on September 17th. There are other factors of course: positive US data of late (GDP upgrade, strong durables) vs. the global slowdown and the fall in stock markets.
Data leading to the event was mixed: ADP and ISM Manufacturing PMI both missed but the ISM Non-Manufacturing PMI (services sector) beat expectations. In addition, August’s numbers usually miss in the initial read only to be revised up later on, so this adds another layer of complication.
