- The Non-Farm Payrolls report met wage expectations but fell on the headline.
- There is plenty of other good news in the report.
- There is nothing in the report to derail the Fed from raising rates in September.
Wages were supposed to be the focus. They rose by 2.7% YoY and 0.3% MoM precisely as expected. That left the scene to the headline figure, which came out at 157,000, significantly worse than 190,00 officially expected and was probably higher after the ADP NFP.
The headline figure stole the headline for market movement.
The US Dollar reacted with a small drop, but there are many reasons to cheer the report and to see the greenback's slide as limited in size and in time.
Good news deeper in the report
Frist and foremost, the miss on the headline is countered by substantial upward revisions for May and June. These total no less than 59,000 positions. Data from the previous month matter more than those from the ones that preceded it, but this is a significant silver lining.
Secondly, the "real unemployment rate," or U-6, fell to 7.5%, the lowest level since 2001. The measure includes people who are discouraged to look for a job or who seek a full-time position but can only find a part-time one.
Another broad measure to be cheerful about is the employment-to-population ratio which stands at 60.5%. The figure does not move markets even though it is moving in the right direction. A With more people working among the total population, the economy can generate more inflation. This development is long-term positive for the US Dollar.
The unemployment rate fell to 3.9% as expected with a stagnant participation rate of 62.9% The latter figure leaves much to be desired but does not change the broad picture.
The US economy is doing very well.
And with the conclusion above, the Fed can continue raising interest rates. The odds of a rate hike in September stood at roughly 80% ahead of the release, and there is no reason, at least according to these numbers, not to see Powell and co. Raising rates in around six weeks.
With all the upbeat data, the US Dollar's post-data fall will likely be limited. The future looks good for the US economy and the US Dollar.
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