The US economy added 212,000 jobs in July, a solid if unspectacular result that does enough to keep the possibility alive of a Fed rate hike in September.
By Peter Martin
Friday, August 7, 2015
Whether the result was better or worse than expected depends on whose polling you look at — a Reuters survey gave a consensus estimate of 223,000, while an Econoday poll showed 212,000 — but factoring in a net upward revision of 14,000 for May and June combined, it was a fairly positive employment report overall. The unemployment rate held fast at 5.3%, as expected, as did the participation rate at 62.6%. Though the pace of payrolls growth was slower in July than in June, other key metrics do point to tightening in the jobs market: average hourly earnings increase 0.2%, while the average working week nudged up to 43.6 hours from the prior 34.5 hours.
Whether a Fed rate rise comes sooner or later, the further firming of the US labor market has helped to reinforce expectations that it is likely to come at some point in 2015, which in turn has served to boost the strength of the dollar. By 9.00am in New York, the dollar was boasting substantial gains against several major currencies: EUR/USD was down 0.46% at 1.0874, while USD/CHF rose 0.64% to 0.9872 and USD/CAD climbed 0.48% to 1.3173.
The latter movement came despite some positive Canadian employment data, released at the same time as the US jobs report. The strength of the Canadian Labor Force Survey was a surprise, showing 6600 jobs added in July versus a consensus estimate for a 5000 decline. The gain in employment was sufficiently large to more than compensate for the steep 6400 drop seen in June. Though the participation rate eased to 64.7%, the unemployment rate remained unchanged at 6.8%. Scratching below the surface of the headline data, though, and the result was not quite as bullish as it seems. The gains were driven by a big increase in part-time workers, while the number in full-time employment actually declined sharply.
The euro was hit today by data showing waning levels of activity in the manufacturing sectors for key eurozone countries. Germany is the largest economy in the European Union, but a report released today showed industrial production in the nation shrank 1.4% in June, confounding estimates for a small rise, and marking the biggest drop since August 2014 (the manufacturing component also fell 1.4%). France is another major economy in the eurozone and its industrial production level dipped 0.1% in June, versus a consensus estimate for no change, while the manufacturing component slid 0.7%.
The strength of the US dollar against the euro today has reduced the chances of the forex pair finishing above 1.0910 by late afternoon in New York, judging by the probabilities implied by Binary Options. At the time of writing, the bid/offer on Nadex for EUR/USD to finish above 1.0910 by 3pm EST was 22.9/37.0.
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