THE TAKEAWAY: [U.S. nonfarm payroll hiring surges 163,000 in July, beats forecasts] > [Massive improvement dampens speculation for more Fed easing] > [USDJPY bullish]
Hiring in the U.S. surged in July to its highest pace since February, boosted by a pickup in employment in the auto sector. According to the U.S. Bureau of Labor Statistics (BLS), nonfarm payrolls rose 163,000 in July, which follows a revised 64,000 gain in June that was smaller than the 80,000 rise initially estimated. Last month’s print comes in well above the consensus forecast of 100,000 new hires, according to 89 economists surveyed by Bloomberg News. Private payrolls rose 172,000 in July, up from 73,000 a month earlier, while manufacturing added 25,000 workers in July compared to 10,000 in June.
Meanwhile, the jobless rate unexpectedly rose to a five-month high in July, climbing to 8.3 percent from 8.2 percent a month earlier. The rise in unemployment rate was due to a rise in the participation rate, which rose to 64.0 percent from 63.8 percent in June.
Despite the better-than-expected increase in payrolls, recovery of the labor market is likely to remain ‘sluggish’, as a global slowdown and looming U.S. fiscal changes weigh on demand for U.S. goods and business confidence.
USDJPY 1-minute Chart: August 3, 2012
Chart created using Market Scope – Prepared by Tzu-Wen Chen
The U.S. dollar soared against the yen on the back of the much better-than-expected payroll figures, as the massive improvement in hiring should quell speculation for more monetary easing, or QE3, from the Federal Reserve. At the time this report was written, the USDJPY pair was trading at 78.71 yen, well above the pre-data level of 78.24.
--- Written by Tzu-Wen Chen, DailyFX Research
