Disappointing data: 223K job gains, earnings 0% m/m, 2% y/y. The unemployment rate is 5.3% but the participation rate is only 62.6%, lowest since 1977. Most data points fall short. The bigger disappointment comes from wages.
USD down with EUR/USD recapturing 1.11. However, the moves aren’t that strong.
Non-Farm Payrolls were expected to show a gain of 230K in June after 280K in May (before revision). The unemployment rate was expected to tick down to 5.4% and more importantly, average hourly earnings carried expectations for +0.2% m/m.
The dollar was generally stronger towards the release.
Data (updated)
- Non-Farm Payrolls: Â 223KÂ (exp. +231K, previously 280KÂ before revisions)
- Participation Rate: 62.6% – new low (62.9% last month )
- Unemployment Rate: 5.3% (exp.5.4%, last month 5.5% before revisions)
- Revisions: -60K April is now 187K instead of 221K and May 254K instead of 280K. (+32K last month)
- Average Hourly Earnings: 0% m/m, 2% y/y (exp. +0.2% m/m, last month +0.3% m/m, 2.3% y/y)
- Private Sector: 223KÂ (ADP showed a gain of +237KÂ jobs, better than expecte).
- Real Unemployment Rate (U-6): 10.5%Â (previous: 10.8%).
- Employment to population ratio: 59.3%Â (previous: 59.4%)
- Average workweek: 34.5 (last month: 34.5).
- Jobless claims: 281KÂ (exp. 270K, last was 271K)
Analysis and currency reaction (updated)
- EUR/USD traded around 1.1060, as tensions are rising towards the Greferendum. The pair has retaken 1.11.
- GBP/USD was around 1.56, off the lows thanks to a positive construction PMI in the UK. Cable is at 1.5625.
- USD/JPY traded around 123.40. The pair usually provides the most relevant reaction. The yen enjoyed safe haven flows. And now, it is slipping down to 123.05.
- USD/CAD traded above 1.2620. The loonie was hit by poor Canadian GDP. The pair slips down to 1.2580.
- AUD/USD was around 0.76, suffering from a risk off environment. 0.7630 is the new level.
- NZD/USD traded around 0.6680. Everything has gone against the kiwi lately. Kiwi captures 0.67.
Analysis: NFP risks second rate hike, not the first in September – 5 points
The good
- Drop in “real unemployment rate†to 10.5%
The Bad
- Small miss on the headline
- Big negative revisions
- And of course wage growth is back to only 2%
The ugly
- Participation rate the lowest since 1977 and skews the unemployment rate.
Background
The Greek crisis took over the headlines lately and pushed back US data. Nevertheless, the dollar has been strengthening also on good data: a nice ADP figure and also an upbeat ISM Manufacturing PMI. Real expectations may have been above 230K.
Assuming the Greek case is solved at least temporarily, the Fed currently seems to be on track to hike in September. However, there are doubts about the timing of the next move, probably not before December and perhaps afterwards. The Fed is data dependent.
