US jobs data presents a conundrum to investors – 7th March 2016
US jobs data presents a conundrum to investors
Ahead of the US jobs report on Friday afternoon, investors’ may well have been pondering how can average be falling when unemployment is at an 8-year low. More people in work inevitably means there are more people earning money so the average earnings would increase. It left investors to ponder what is more important; strong jobs growth or weak earnings growth? It has been a conundrum facing Sterling for months, if not years, but this was the first time it had troubled the US Dollar.
The non-farm payrolls data themselves were decent enough, with the 242,000 jobs added in February which beat the forecast increase of 190,000. Another 30,000 jobs were also added by revisions to the figures for December and January. But investors were perturbed by the fall in average weekly hours from 34.6 to 34.4 and by the -0.1% monthly decline in average hourly earnings. On balance they decided the numbers were a contraindication to a Fed rate increase and they sold the US Dollar.
Currencies reacted to the jobs report based on the tried-and-tested logic that any postponement to a US rate increase is positive for commodity-related currencies and negative for the safe-havens. The South African Rand won the day and the Swiss Franc came last. The Rand’s 1.1% rise was the biggest move of the day while the Commonwealth Dollars did not do so well, with quarter-point rises for the Canadian Dollar and NZ Dollar and a half-cent gain for the Aussie Dollar.
The US employment data dominated Friday’s session. Investors showed no interest in the North American trade figures and seemed unworried by the sharp fall in Canada’s Ivey purchasing managers’ index, from 66.0 to 53.4.
Investors will not be overwhelmed by economic statistics today. There is nothing on the list with any obvious potential to move exchange rates. German factory orders, released ahead of London’s opening, fell by -0.1% in Jan. The number might not look too clever but it was better than the predicted -0.5% decline. Italian producer prices will count for little and Norwegian manufacturing output will matter less than the 5% by which oil prices have risen since Friday morning. There are no useful North American data to come. For heavyweight ecostats investors will have to wait for tonight’s Chinese trade figures and Japanese GDP.