- The US jobs report came out slightly below expectations.
- However, it is good enough not only to justify a December increase but also further moves in 2019.
The US reported an increase of 155,000 jobs in November, significantly below expectations. Negative net revisions worth 12K were not helpful. Another downer was the slower wage growth in November: 0.2%.
However, salaries are still up 3.1% YoY, within expectations and at absolute levels, an upbeat figure. Moreover, the Unemployment rate remained at the historical low of 3.7% with a stable participation rate of 62.9%.
The US Dollar was initially knocked down but recovered quite quickly. Why?
Do not fade the Fed
The data missed market expectations but remains upbeat. The employment market is still expanding at a solid clip and wages are rising at a healthy pace. If somebody had doubts about a rate hike in December, these doubts were put to rest despite the miss.
The more substantial question is: what will the Fed do in 2019?
The Fed's dot-plot from September points to three rate increases next year. Markets have long discounted these projections and price only around one hike in 2019 and potentially a cut in 2020.
These gloomy expectations are probably exaggerated. Not only does the economy look good and justify further hikes, but the Fed remains hawkish.
It is important to note that Fed Chair Jerome Powell was very pleased with the labor market in a speech on Thursday. It is probably safe to assume that the world's most powerful central bank had prior knowledge of the jobs before delivering his speech.
So, even if some market participants see the NFP as disappointing, the Fed does not think so.
On this background, the US Dollar has room to rise from the post-NFP lows.
Background
The US was expected to report an increase of around 200,000 positions in November, which is below the initial report for October that showed 250,000 jobs gained, but a healthy increase nonetheless. Average Hourly Earnings, or wages, carried expectations for 0.3% MoM and 3.1% YoY. Wage growth finally topped 3% in October. The Unemployment Rate was forecast to remain at the historic lows of 3.7%.
Fed Chair Jerome Powell was upbeat on the economy and on the job market in particular. He said that the labor market is doing well by "many measures." His speech on Thursday may have raised expectations ahead of the new
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.