US Dollar Nudged Lower by Mixed October US Jobs Report
- Headline jobs growth comes in at +261K, while last month’s print was revised higher from -33K to +18K.
- US wage growth weaker at+2.4% y/y despitethe unemployment rate dropping back to 4.1%.
- The US Dollar had a minor slip following the data, dropping from 94.75 to 94.56.
Jobs growth in the United States increased by +261K in October, falling well short of expectations of +313K, as parts of the economy continued to deal with recovery efforts following Hurricanes Harvey and Irma in late-Q3’17. The September reading was revised higher to +18K from -33K, nullifying what was the first negative headline figure in seven years.
Other parts of the report painted a mixed picture of labor force strength. The labor force participation rate edged lower, down to 62.7%, which is part of why both the the unemployment rate (4.1% from 4.2%) and the underemployment rate (7.9% from 8.3%) dropped.
It’s important to keep in mind that the US economy doesn’t need such strength in the headline figure to maintain the unemployment rate at its current “full employment” level. According to the Atlanta Fed jobs calculator, the US economy needs to add +112K jobs per month over the next 12-months in order to keep the unemployment rate below 4.2%.
As far as rate hikes are concerned, this report has had minimal impact. Fed funds rate expectations continue to price in December 2017 as the most likely period for the next rate move, with hike odds holding at 100% after the data. Overall, the October US Nonfarm Payrolls report was a mixed bag that should leave no lasting impression on the US Dollar.
Here are the data driving the greenback this morning:
- USD Unemployment Rate (OCT): 4.1% versus 4.2% expected unch.
- USD Change in Nonfarm Payrolls (OCT): +261K versus +313K expected, from +18K (revised higher from -33K).
- USD Labor Force Participation Rate (OCT): 62.7% versus 63.1% expected unch.
- USD Average Hourly Earnings (OCT): +2.4% versus +2.7% expected, from +2.8%(revised lower from +2.9%) (y/y).
Chart 1: DXY Index 5-minute Chart (November 1 to 3, 2017 Intraday)
Immediately following the data, the US Dollar traded lower versus the Euro and the Japanese Yen, with the Dollar Index (DXY) dropping from 94.75 ahead of the data to as high as 94.56 at the time this report was written. EUR/USD traded between 1.1658 and 1.1690 around the data, while USD/JPY traded between 113.70 and 113.99.
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
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