This clearly indicates that the labor market is deteriorating which could force a heavier hand by the Federal Reserve at the end of this month. More sectors also reported job losses than job growth with the biggest contraction seen in manufacturing, construction, retail trade, information and financial sectors. The unemployment rate also increased from 4.7 to 5 percent, a 2 year high.
The big question now is will the US economy fall into a recession. Today's labor market report certainly provides a good argument for that. Yesterday, the futures market was pricing in a 34 percent chance for a 50bp rate cut. On the heels of the NFP report, those odds have increased to 54 percent. As much as inflation rising oil prices keeps inflation a problem, the Fed will have to do all it takes to restore stability in the US economy if they want to prevent a recession. Even though average hourly earnings were stronger than expected, it remained unchanged compared to the prior month while the annualized pace of earnings growth slowed from 3.8 to 3.7 percent.
We expect dollar weakness to continue.
Do you think that the non-farm payrolls number means that we will fall into a recession? Discuss this topic with DailyFX Analysts on the Forum
By Kathy Lien, Chief Strategist of DailyFX.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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