Non-Farm Payrolls +195K, Unemployment Rate 7.6% – Dollar jumps

The US gained 195K jobs in June. It was expected to gain around +165K jobs, but real expectations have probably risen due to indicators released earlier in the week. The US gained 175K in May, according to the initial report, before revisions. The unemployment rate was expected to drop from 7.6% in May (before revisions) to 7.5% in June. It stayed at 7.6%. June has traditionally seen weak job growth in the initial publication: the highest job gain since June has been +146K, but this time is different. May’s number was revised to 195K – like in June. 

EUR/USD was trading under 1.29, still hurt from Draghi’s forward guidance and it is falling towards 1.28. GBP/USD was below 1.50 after the Carney crash and it is extending its drop to 1.4860. USD/JPY was flirting with the 100 line and is now at 100.85.

Analysis: 3 reasons why this jobs report is really great.

The data

• Non-Farm Payrolls:  +195K
• Participation Rate: 63.5% – explains the stable unemployment rate (63.4% last month)
• Unemployment Rate:  7.6%  (last month 7.6% before revisions)
• Revisions: – Total of +70K: May revised up from 175K to 195K (+20K), April revised from 149K to +199K (+50K),  Last month saw minor revisions of -12K.
• Private Sector NFP: +200K (Last month:+178K, ADP showed a strong gain of 188K, expectations stood on +175K)
• Real Unemployment Rate (U-6): 14.3% (previous: 13.8%) – bad news here.
• Employment to population ratio: 58.7% (previous: 58.6%)
• Average Hourly Earnings: 0.4%, double the expectations for +0.2%
• Average workweek: 34.5K (Last month: 34.5 hours).

Background

Job data is always important, and after the Fed put an emphasis on jobs for its decision on tapering QE, it became even more important. Surveys made last week pointed to a gain of around 165K, but data leading to the event has exceeded expectations.

Two figures stood out: ADP showed a better than expected gain in private sector jobs, and the employment component of the ISM Non-Manufacturing PMI jumped from 50.1 to 54.7 points, indicating strong growth in hiring in the US services sector.

Trading volume is not fully normal: the US enjoyed the Independence Day holiday on Thursday. Some traders haven’t returned to work on Friday.

Further reading:

• US dollar strength to continue
• Draghi presents forward guidance on low rates – EUR crashes
• Carney crash: GBP free falling as BOE warns on rate

Get the 5 most predictable currency pairs