Morning Commentary: Jobs Report – A Little Something for Everyone

Foreign Exchange - Morning Commentary

Jobs Report – A Little Something for Everyone

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
If you are a bull or a bear or optimistic or pessimistic about the U.S economy's future tract, today's January jobs report has a little something for everyone. The key non-farm payroll number far exceeded expectations coming in at a whopping 304,000.  However, there was a major downward revision to December's data by an incredible 90,000 jobs.  This took the previous number from 312,000 to 222,000. If you combine the past three months, the average comes in near 241,000 which indicates that the economy is growing and there continues to be demand for workers despite some indices indicating a slowing economy.
More good news comes from the labor force participation rate which rose from 63.1% to 63.2%, which is the highest rate since 2013. Wage inflation was benign rising by just 0.1% against expectations for a gain of 0.3%. YoY wage inflation remains at a healthy 3.2%. The UR did rise slightly from 3.9% to 4.0%. U.S interest rates, which had collapsed on the Fed’s dovish pivot on Wednesday’s FOMC announcement, are up modestly on the day and the U.S. dollar (DXY) is mixed.
Bottom line : The U.S. economy is not as bad-off as the Q4 equity collapse indicated. It appears the Federal Reserve needs to work on its communication skills to the market. Being overly hawkish in October to being overly dovish in January only adds to the uncertainty and volatility of the markets. The Fed should be using language that keeps all options open and looking at the big picture and be flying at 40,000 feet and not get caught up in all the market temper tantrums regarding equities and short term data. The Fed could look pretty foolish come the March FOMC meeting if equities continue to surge and the economy stabilizes and they have to reverse course again. Patience and prudence please.
  • U.S. equities had their best January performance in 30 years with the DJI up by 7.2% and the S & P 500 up by 7.9%.
  • China reported a very weak Caixin manufacturing PMI for January. Market expectations were for a slight decline from 49.7 to 49.6 but the index instead fell sharply to 48.3. This is the lowest reading since February 2016 and provides further economic data about a slowing Chinese economy. The Chinese yuan had its biggest fall today in the past seven weeks.
  • Almost every emerging market PMI weakened today and many have fallen back below the key 50 level which indicates expansion or contraction. Taiwan, Korea, Czech Republic, Indonesia, Poland, Turkey, and South Africa have all their PMI readings below 50 now.
  • (Go Rams!!!)
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