THE TAKEAWAY: USD Change in Nonfarm Payrolls (MAR) > +88K versus +200K expected, from +268K (revised from +236K) > USD Unemployment Rate (U3) (MAR) > 7.6% versus 7.7% expected and prior > EURUSD BULLISH
Data had begun to turn less bright the past several weeks for the world’s largest economy, but no one expected to see a March labor market report of such a poor quality. Literally, not one economist, according to a Bloomberg News survey, forecasted that the US economy would only add +88K jobs last month; the low estimate was +100K. This double-digit print is the worst labor market report since the May NFPs released in June 2012, and it significantly undercut the consensus forecast of +200K. When adding in revisions (February was revised up by +32K, from +236K to +268K), the overall jobs change was -80K, relative to the consensus forecast.
At first glance, the Unemployment Rate (U3) statistics appear to be a silver lining to this mess: March’s rate fell to 7.6% from 7.7%, beating expectations. Similarly, the Underemployment Rate (U6) – those unemployed who are actively looking for a job, involuntarily part-time workers who want full-time work but have had to settle for part-time work, and marginally attached workers who want and are available for work, but are not actively looking – dropped from 14.3% to 13.8%.
On the surface, both of these are indications of a strengthening labor market, but in context of the Participation Rate, which fell to a three-decade low at 63.3%, one thing is clear: Americans are leaving the labor market en masse, essentially giving up on their personal employment prospects after what has been a long period of despair since the global financial crisis started in late-2007. Accordingly, it is evident that the US labor market can no longer be viewed as improving, but instead, just barely treading water.
It needs to be pointed out that the government’s ill-timed budget sequestration hit in March. By sector, the Government shed -7K jobs in March, while Manufacturing lost -3K (after adding +56K in February), and Retail Trade shed -24K. Companies are clearly scaling back hiring as fiscal policy looks uncertain over the next few months and years.
EURUSD 5-minute Chart: April 5, 2013
Charts Created using Marketscope – Prepared by Christopher Vecchio
The EURUSD had the strongest reaction to the data, rallying from near 1.2950 after the release towards 1.3030 in the minutes after. Overall, the reaction was a bit more tempered, with the pair falling back to 1.2989, at the time this report was written. The Euro seems to be getting its own irrational boost in the wake of the European Central Bank press conference yesterday, at which ECB President Mario Draghi said that there was “no plan B” to the Euro (another one of his “whatever it takes” statements). The USDJPY, on the other hand, was flat if you could believe it, falling from 96.25 pre-release, to as low as 95.74 after, back to then to 96.65, until finally settling near 96.27, when this report was written.
--- Written by Christopher Vecchio, Currency Analyst
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