The headline number for non-farm payrolls in this morning’s employment report may have been desperately weak, but there were just about enough positives within the detail of the report to keep alive talk of a rate hike at the September FOMC meeting.
By Peter Martin
Friday, September 4, 2015
Non-farm payrolls grew by just 173,000 in August, well below the consensus estimate of 223,000 and the lowest payroll growth seen in five months, but the weakness in this number is muddied somewhat by seasonality issues — in recent years, August’s payrolls number has subsequently seen steep upward revisions. There were also upward revisions in this report to payrolls for June and July, totalling 44,000 more than had previously been calculated.
There were a number of signs that the labor market remains healthy: the unemployment rate fell to a better-than-expected 5.1% while the participation rate held steady at 62.6%; the average workweek was 34.6 hours, compared to 34.5 in July; and average hourly earnings rose by a better-than-expected 0.3%, to take the year-on-year growth in hourly earnings to 2.2%.
By and large, the forex market seems to have interpreted the data as dollar positive, with the dollar generally strengthening in the direct aftermath of the release of the report, consolidating for the most part a trend that was already forming in the day’s trading. GBP/USD slid 0.39% to 1.5196, USD/CHF gained 0.2% to 0.9752 and AUD/USD plunged 0.93% to 0.6953.
Comments made earlier by Richmond Fed President Jeffrey Lacker arguing in favor of a rate hike will have been one of the factors at play in lifting the dollar. Mr Lacker, who has a vote at the September FOMC meeting and already pushed for tightening at the June meeting, suggested the time had come to tighten in order to suit improvements in the economy saying, ‘it's time to align our monetary policy with the significant progress we have made.’ He argued that the labor market in his region was noticeably tighter, observing that ‘over the last year or so, reports of difficulty finding and hiring qualified workers have become notably more widespread and persistent.’
Labor data was also released north of the border today, and things are looking increasingly promising for the Canadian labor market. Statistics Canada’s Labor Force Survey showed employment increased by 12,000 in August, the best performance in three months and confounding estimates that had pointed to a decline, though the unemployment rate rose from 6.8% to 7.0% as more people returned to actively seek employment. What is particularly encouraging about the rise in employment is that it looks to have been driven by growth in full-time jobs, unlike July where part-time jobs lay behind the increase seen then. The Bank of Canada meets next week in order to decide on monetary policy; though today’s report will have reduced the chances of another move to ease, the Loonie still weakened substantially against the US dollar. USD/CAD rose 0.37% to 1.3227.
Overall, sentiment in the financial markets remain fragile and another slide in Asian stock markets overnight has served to boost safe-haven currencies, particularly the Japanese yen, while some of the biggest declines have been seen by the commodity currencies, such as the Australian and New Zealand dollars. USD/JPY slid 0.75% to 1.1918.
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