- The US economy added 467K jobs in January, well above the 150K forecast, while wage growth was hotter than expected.
- The dollar saw kneejerk strength, US yields rose and US equities fell in pre-market trade as markets upped Fed tightening bets.
Nonfarm Payrolls (NFP) rose by 467K in January versus the median forecast for a 150K rise, data published by the US Bureau of Labor Statistics showed on Friday. That marked a slight deceleration from December's pace of job gains when 503K jobs were added (revised up from 199K). The massive headline beat on expectations was driven by a 444K rise in private nonfarm payrolls (versus the expected 150K gain). Manufacturing payrolls saw a slightly smaller than expected gain of 13K versus the 25K forecast.
Average Hourly Earnings rose at a stronger MoM pace of 0.7% in January, above the expected 0.5% MoM gain and faster than December's 0.5% MoM gain, which had been revised lower from 0.6%. That helped push the YoY rate of Average Hourly Earnings growth to 5.7% from 5.0% in December (which had been upwardly revised from 4.7%). That was well above the expected YoY rate of 5.2%.
The unemployment rate unexpectedly rose a tad to 4.0% from 3.9% in December, against expectations for it to remain unchanged. But the U6 Underemployment Rate continued to decline, dropping to 7.1% in January from 7.3% in December. Meanwhile, the participation rate jumped to 62.2% from 61.9% in December, taking it to within 1.2% of its pre-pandemic levels.
Market Reaction
The much stronger than expected headline job gain, combined with unexpectedly high wage growth and still very robust labour market slack figures has seen the US dollar jump higher in recent trade. The DXY, which was trading around the 95.30 mark prior to the data, has lept to session highs above the 95.50 level, though still trades down about 1.7% on the week and remains on course for its worst week since March 2020.
In terms of other asset classes; US bond yields have surged across the curve in anticipation that strong wage growth and better than expected labour market outcomes will encourage the Fed to tighten monetary policy more aggressively this year. The US 2-year jumped 7bps on the data to fresh post-pandemic highs around 1.28%, the 5-year lept roughly 8bps on the data to also hit fresh post-pandemic highs around 1.75% and is now eyeing late 2019 highs just under 1.80%. The 10-year also jumped about 8bps on the data and is now flirting with the 1.90% level and last month's post-pandemic highs. The 30-year saw a slightly less convincing bounce of about 6bps, meaning the 5s 30s spread fell to fresh post-pandemic lows near 20bps.
US stocks, meanwhile, took a hit in pre-market trade as the hot labour market data pumped Fed tightening fears. S&P 500 futures dipped towards 4450 from around 4480 prior to the data and now trade more than 1.5% lower on the day. The post-strong Amazon earnings upside seen during Asia Pacific trade now seems firmly in the rear-view mirror.
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 remains stuck near 1.0800 after US employment data
EUR/USD struggles to find direction and moves up and down in a narrow channel at around 1.0800 in the American session on Wednesday. The data from the US showed that employment in the private sector rose less than expected in November and helped the pair limit its losses.
GBP/USD battles 1.2600 after US ADP data
GBP/USD is having a difficult time stabilizing above 1.2600 after closing the first two trading days of the week in negative territory. Despite the weaker-than-expected ADP Employment Change data, the US Dollar stays relatively resilient amid cautious market stance.
Gold rebounds to $2,030 as US yields stretch lower
Gold recovered toward $2,030 after testing $2,020 earlier in the day. The benchmark 10-year US Treasury bond yield declined to its lowest level in three months below 4.15% after US employment data and helped XAU/USD gain traction.
Bitcoin-based meme coin ORDI price action wobbles after 1,100% rally
The Bitcoin-based BRC-20 meme coin, which had people confused as being an actual valuable token, is now slowly creeping up to that status. ORDI price rise over the past couple of days has been astonishing, and with BTC driving the price and crossing $44,000, ORDI is also gaining rapidly. But not for long.
The Dollar is struggling to trend
For the last three trading sessions, the dollar index has been crossing up and down the 200-day moving average every day. All in all, the flirting with this level has been going on for more than three weeks, during which neither bulls nor bears were able to form a stable trend.