The US labour market is always good for a surprise – Commerzbank

What a US jobs report! Not only was the actual number higher than any of the economists in the Bloomberg survey had expected, but the previous two months were revised sharply higher and the unemployment rate surprisingly fell, Commerzbank’s FX analyst Michael Pfister notes.

US economy is slowing but remains solid

 “Average job growth in the final quarter was actually quite a bit higher than the average in the second quarter. And the July jobs report, which sent shock waves through the market in early August, looks less scary after the revision.”

“First, the market reaction was textbook-like: the USD rallied sharply and a 25bp cut was priced out across the curve. The upshot is that interest rate expectations now look much more realistic, i.e. the market seems to be backing our economists' view that the Fed will cut rates by 25 basis points per meeting at the upcoming meetings, rather than the larger pace of 50 basis points.”

“The figures have once again confirmed something crucial: one should simply not over-interpret a single data point from the payrolls at the moment, both in terms of positive and negative surprises. Friday's figure is also likely to be revised several times. More important for the Fed's decisions will be the medium-term trend in the number of jobs created. And this underlying trend tends to confirm the pre-summer view that the US economy is slowing but remains solid. Conversely, one should not bet too heavily against the USD.”