Fundamental Analysis

JOBS REPORT WHIFFS, UNEMPLOYMENT RATE FALLS TO 4.7%

UNEMPLOYMENT RATE

US employers in May added the fewest workers in six years, while the unemployment rate fell to an eight-year low.

The Labor Department’s report Friday showed that nonfarm payrolls grew by 38,000 in May, much less than expected, while the unemployment rate fell to 4.7%.

Economists had forecast that nonfarm payrolls grew by 160,000, which would have matched April’s pace, and that the unemployment rate slipped to 4.9% from 5%, according to Bloomberg.

The pace of month-on-month job gains has slowed since October. The nonfarm payroll print for March was revised to 123,000 from 160,000.

While this suggests that employers are scaling back hiring, it’s worth considering that the low unemployment rate means that fewer new workers are willing and able to work.

The roughly 35,000 Verizon workers who were on strike during the reference week of the jobs report were expected to drag the headline, though there was no consensus on the extent of the dent. Information jobs fell 34,000.

Average hourly earnings rose 0.2% month-on-month and rose 2.5% year-on-year, just as forecast. Wage growth in April was revised higher.

The labor-force participation rate inched down to 62.6%, though it’s still up from the 38-year low of 62.4% touched in September.

With the Federal Reserve considering an interest-rate hike this summer, the jobs report was being watched for progress on the full-employment leg of its mandate. Fed fund futures, which reflect traders’ expectations on future interest rates, plunged after the jobs report.

“And thus died the June rate hike,” wrote Pantheon Macroeconomics’ Ian Shepherdson in a note. BNP Paribas economists said the data support their view for the Fed to keep rates on hold until at least 2018.

The dilemma for the Fed, Shepherdson said, is that the low unemployment rate unambiguously calls for tighter policy. However, if Fed members believe the slowdown in jobs creation will persist, they’ll expect the unemployment rate to rise again even with interest rates unchanged.

The response to the jobs report across markets was decisive. As expectations for higher rates fell, the dollar tanked, too. Treasurys sold off, sending their yields higher. Gold spiked and futures fell.

Via Bloomberg, here’s what Wall Street was expecting:

  • Nonfarm payrolls:+160,000
  • Unemployment rate: 4.9%
  • Average hourly earnings month-on-month: +0.2%
  • Average hourly earnings year-on-year: +2.5%
  • Average weekly hours worked: 34.5

Source: http://www.businessinsider.com/

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Vladimir Ribakov

Following 11+ years of trading experience, trading my own accounts as well as for hedge funds and brokerages, I have decided to fulfill my destiny and to personally mentor Forex and Commodities traders. When I released the “Broker Nightmare” (software that hides trades from brokers) 8 years ago, I found an overwhelming number of frustrated people who genuinely wanted to learn how to trade the Forex market, but instead found themselves scammed and misled. Over the years I have also release other trading systems based on my trading strategies, and met a lot of people on my worldwide Forex seminars. We’ve formed a close Forex community and we meet once or twice a year in various locations in Europe.

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