The Market Is Making Too Much Fuss Over A Decent Report
Skerdian Meta • 2 min read
Here comes the US employment data. Although in the last meeting the FED said that they will base their next interest rate decision on the employment sector, I don´t really believe it. Their dual mandate is to keep inflation stable and promote maximum employment. Are we supposed to believe that the FED will give up on half of the mandate just because they have been failing for years at keeping prices steady? Actually, it would be a sensible thing to do; if you´re not good at something, then better give up early. But they don´t have that option.
So, the employment numbers were published more than an hour ago and although the headline number gives the impression of a negative report, in my opinion that´s another decent report. It´s true that the unemployment rate ticked 1 point higher to 5.0% from 4.9%, but that´s still considered as full or natural employment. The 5% unemployed members of the country´s workforce are people who change jobs, move house, refuse to work etc.
The non-farm employment change was 15k below expectations, but 156k is still a respectable number. After all, these are new jobs being created by the economy and the number is more than enough to support the population growth. Besides that, last month´s number was revised 16k higher, which offsets the miss in the expectations and the trend in employment is still up.
The average hourly earnings (wages) ticked up 2 points last month and it even beat the expectations. The earnings are more important than the new jobs numbers themselves, because they show that the labour market is really tightening up and the employers are offering more to their staff. This is what really shows the shape of the labour market, the other indicators can be distorted by so many factors.
That´s not a bad number as long as the wages pick up. The yearly earnings picked up as well, from 2.4% previously to 2.6% today. The change in the household employment was quite positive too, it jumped from 97k to 354k.
So, if we look at all the components of this report, we can say that it is mostly positive. The US economy keeps producing more than enough jobs, the unemployment is at the natural level and the wages are picking up. This report puts the labour/employment market in a better place than it was before the FED meeting and remember, the FED made it totally clear that they were more than pleased with the US labour market.
If you want to see the glass half empty, then this report leaves things as they were at worst. Looking through a dove´s eyes, today´s US employment data is neutral, to me that´s a mildly hawkish report. The market didn´t think so since the USD lost about 50 pips across the board after the release. This move will probably reverse when the numbers are digested by the forex market, but today is Friday so there might be some sort of position squaring in the market, which might mix things a little.