- US NFP comes in at 156k for August
- Prior reading revised lower to 189k (from 209k)
- Average earnings also misses (+0.1% vs +0.2% exp)
The much talked about seasonal weakness in the August payrolls numbers has shown itself once again with today’s release making it 17 out of the last 21 for this month that have missed consensus forecasts. The release of 156k is not too bad as a stand alone figure, but when the downwards revisions to the previous readings and the fall in average earnings are taken into account it is something of a disappointment.
Whilst the reading is far from a disaster it does continue the recent trend of declines seen since the number peaked around the middle of 2014. Also note the recent divergence between the ADP number and the NFP, with the former rising strongly on Wednesday ahead of today’s disappointment.
As well as the headline reading the average earnings component can be market moving as traders look to changes in wages for signs of inflation. During the past couple of years when there’s been a slight cooling n the employment change figure, the average earnings has steadily risen. The correlation between average earnings and inflation (as shown by CPI) is fairly strong with the rise in wages seemingly leading the price index higher since the start of 2015. For much of this year however, there has been a pullback and whilst the year on year figure of 2.5% was similar to recent prints the month on month number dropped to 0.1% from 0.3% previously.
The market reaction to the release initially was fairly typical of a worse than expected reading with Gold and the Tnote spiking higher whilst the US dollar dropped. There has been a large pullback to these first moves however with the Tnote in particular offering a potential warning sign in dropping to its lowest level of the day.
With many market participants well aware of the seasonality issues at play, the report may not be the death knell for the US dollar that it appears on first viewing. Where the market ends today could well be key in determining the next direction for the greenback.
Shortly after the release the EURUSD also fell back, with the timing of the release of a source report suspicious to say the least. The rumour stated that the ECB is said to "see chance of QE plan to not be fully ready by December".
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