Daily analysis | 6 October 2017
Just a blip or a signal of a bigger problem?
September’s US jobs report was released earlier today, the non-farm payroll (NFP) report came out at -33,000 jobs. This is the first time since 2010 when the US economy was recovering from the global financial crisis, that the US NFP has seen a loss of jobs. The expected number for the NFP was quite low at 80,000 because of the hurricanes Irma and Havey that have hit the US. US Labor stated, “147 million people not at work due to bad weather”, food and drinks services were hit the hardest, losing 105,000 positions.
There was some good news, the US unemployment rate fell from 4.4% to 4.2% for September and the average hourly earnings (YoY) increased from 2.7% to 2.9% beating expectations of a 2.6% increase. The wage increase was very good news and the US dollar rallied on the release of this news. The wage growth might be misinterpreted as many of the jobs lost during September due to the hurricanes were low paid jobs. In addition to September’s rough month, the July number was revised lower from 189,000 to 138,000
July’s NFP number was also revised lower from 189,000 to 138,000 although the NFP for August got revised higher from 156,000. To summarise, 2017 so far has seen the slowest jobs growth in at least five years. This will be a dent to US President Donald Trump’s election promise to deliver 3% GDP growth, with many experts doubting whether this 3% growth target is reachable in the near-term at least. It’s understood by economists that to achieve higher levels of growth two factors take centre stage, these are Productivity and more people working.
The markets will probably shrug off the poor NFP number blaming it on the hurricanes and instead, the markets will be buoyed by the positive wage growth, therefore increasing the likelihood of a US interest rate increase in December.
On Wednesday Janet Yellen gave opening remarks at a Community Banking Event, as expected she didn’t talk about the state of the economy or the when interest rates are expected to rise. She instead talked about how the Federal Reserve is looking at ways of tailoring bank regulations according to the size and complexity of the lenders. This will be welcome news to critics of Dodd-Frank regulations which includes US President Donald Trump, which doesn’t discriminate according to size or services provided and as a result, many smaller institutions such as community banks have been punished, for action they were largely not involved in.
The US Dollar Index has reached a resistance level at 94.10 if price fails to break through this level on a retest we could see the Dollar Index fall towards the support level of 93.0.
- Resistance: 94.10
- Support: 93.00
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