NFP Closes A Mixed Week for US Employment
Yesterday the price action wasn’t particularly quiet once again as markets got excited about the US employment reports, which were quite positive on first glance. The USD spiked higher after the NFP report, but the market corrected later to end the day little changed, with 10-year Treasury yields closing the day above the 4% threshold. The report was more mixed than it looked like, as were the jobs reports this week, which left things as they were.
Before the report was released, the FED funds were pricing in a 68% chance of a March rate reduction and 136 bps in cuts this year. The US dollar jumped after non-farm payrolls jumped above 200K, with USD/JPY almost reaching 146 and a 58% chance of a March cut and 127 basis points for 2024.
December 2023 US Employment Data from the Non-Farm Payrolls Report![nonfarm payrolls Dec 2023]()
Non-farm payrolls
- November non-farm payrolls +216K vs +170K expected
- Prior non-farm payrolls were +199K (revised to +173K)
- Two-month net revision -71K vs -35K prior
- Unemployment rate 3.7% vs 3.8% expected
- Prior unemployment rate 3.7%
- Participation rate 62.5% vs 62.8% prior
- U6 underemployment rate 7.1% vs 7.0% prior
- Average hourly earnings +0.4% MoM vs +0.3% expected
- Average hourly earnings +4.1% YoY vs +3.9% expected
- Average weekly hours 34.3 vs 34.4 expected
- Change in private payrolls 164K vs +130K expected
- Change in manufacturing payrolls +6K vs +5K expected
- Household survey -683K vs +747K prior
- Birth-death adjustment -52K vs +4K prior
The headlines on non-farm payrolls may have outperformed the expectation by +46K, however looking into the details, there are several weak points, such as the negative revisions for October and November by a total of -71K. The unemployment rate ticked lower indeed to 3.7%, compared to the 3.8% projected, but labor force participation declined by 0.3%, implying that unemployment would in fact grow if the participation rate remained the same.
Government jobs increased by 52K, which accounts for a sizable portion of the data, while 683K jobs were lost, so that does not indicate a surging US economy. The JOLTS jobs were soft on Wednesday, but taking into account the ADP and initial jobless claims figures which beat expectations, the market was expecting another beat. So, after the initial 50 pip jump, the USD reversed and lost around 100 pips across the board. But, eventually claimed back half of the losses to end where it started.
EUR/USD Live Chart
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