Forex News – December taper chances higher following strong jobs report
December 6, 2013 2:38 pm
US nonfarm payrolls, unemployment
The US November employment report, which was released today, again surprised on the upside just as October’s report did. Nonfarm payrolls grew by 203 thousand versus expectations of a gain of 180 thousand. October’s number was revised slightly lower to 200 thousand against 204 thousand initially reported.
There were strong job gains in almost every category; from manufacturing (+27k), to construction (+17k), to retail (+17k) as well as the public sector (+7k). The number of manufacturing payrolls was almost triple what economists were predicting and provided some evidence of the so-called manufacturing renaissance that the US is said to be enjoying recently.
What was even more surprising than the establishment survey however was the big drop in the rate of unemployment of the household survey to 7.0% compared to 7.3% previously, while the expectation was for a reduction to 7.2%. 7% was much closer to the 6.5% level by which the Federal Reserve said it would start considering tightening monetary policy or raising interest rates. 7.0% is the lowest unemployment rate of the last 5 years.
The rise in the labor force participation rate to 63.0% versus 62.8% during the previous month was more welcome news as a greater number of Americans were either working or hoping to find work.
The only figures which merely met instead of beating expectations was the average earnings – up by 0.2% month-on-month and the average workweek, which increased by 0.1 hours month-on-month – as expected – to 34.5 hours.
The bright jobs report certainly puts the question to the Federal Reserve with respect to tapering. On the one hand, it gives the Fed a unique opportunity to get tapering started and to gain credibility in that it will remove the stimulus when it is necessary to do so. Given the big drop in unemployment, the hawks may justifiably ask what else the Fed would have to wait for before it gets moving on reducing stimulus.
On the other hand, the Fed might prefer not to taper at this point and to wait after the holidays and for a budget deal in Washington to materialize. Janet Yellen, who will replace Ben Bernanke as head of the Federal Reserve, has not painted a very bright picture of current US economic prospects recently. Therefore it will be interesting to see what happens during the December 17/18 meeting, since this strong a report might not have been anticipated by the Fed itself.
Whatever the exact moment of tapering eventually proves to be, this jobs report has definitely brought forward the date by which the Fed will start to phase out QE and – eventually – even to start raising interest rates.
Market reaction to the numbers was volatile. Initially, seconds after the release, the euro versus the dollar dipped as low as 1.3619 from 1.3660 or so before the announcement. As the market digested the positive aspects of the report, the euro made a fresh 5-week high of 1.3693.
US nonfarm payrolls, unemployment
The US November employment report, which was released today, again surprised on the upside just as October’s report did. Nonfarm payrolls grew by 203 thousand versus expectations of a gain of 180 thousand. October’s number was revised slightly lower to 200 thousand against 204 thousand initially reported.
There were strong job gains in almost every category; from manufacturing (+27k), to construction (+17k), to retail (+17k) as well as the public sector (+7k). The number of manufacturing payrolls was almost triple what economists were predicting and provided some evidence of the so-called manufacturing renaissance that the US is said to be enjoying recently.
What was even more surprising than the establishment survey however was the big drop in the rate of unemployment of the household survey to 7.0% compared to 7.3% previously, while the expectation was for a reduction to 7.2%. 7% was much closer to the 6.5% level by which the Federal Reserve said it would start considering tightening monetary policy or raising interest rates. 7.0% is the lowest unemployment rate of the last 5 years.
The rise in the labor force participation rate to 63.0% versus 62.8% during the previous month was more welcome news as a greater number of Americans were either working or hoping to find work.
The only figures which merely met instead of beating expectations was the average earnings – up by 0.2% month-on-month and the average workweek, which increased by 0.1 hours month-on-month – as expected – to 34.5 hours.
The bright jobs report certainly puts the question to the Federal Reserve with respect to tapering. On the one hand, it gives the Fed a unique opportunity to get tapering started and to gain credibility in that it will remove the stimulus when it is necessary to do so. Given the big drop in unemployment, the hawks may justifiably ask what else the Fed would have to wait for before it gets moving on reducing stimulus.
On the other hand, the Fed might prefer not to taper at this point and to wait after the holidays and for a budget deal in Washington to materialize. Janet Yellen, who will replace Ben Bernanke as head of the Federal Reserve, has not painted a very bright picture of current US economic prospects recently. Therefore it will be interesting to see what happens during the December 17/18 meeting, since this strong a report might not have been anticipated by the Fed itself.
Whatever the exact moment of tapering eventually proves to be, this jobs report has definitely brought forward the date by which the Fed will start to phase out QE and – eventually – even to start raising interest rates.
Market reaction to the numbers was volatile. Initially, seconds after the release, the euro versus the dollar dipped as low as 1.3619 from 1.3660 or so before the announcement. As the market digested the positive aspects of the report, the euro made a fresh 5-week high of 1.3693.
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