US Dollar Tanks on August NFPs Miss Despite Unemployment Drop - Again

September 6, 2013

For the second consecutive month , the headline US NFP figure missed while the Unemployment Rate dropped. And, again, the US Dollar is suffering.

- US labor market continues to improve only at a modest pace (+150K to +200K), but August report disappoints handily.

- Participation Rate falls – lowest since August 1978 – leading to decline in Unemployment Rate.

- June and July NFPs revised lower by -74K.


The improved patch of US economic data earlier this week proved to be a red herring – again , as the August market report was disappointing all-around. The headline figure at +169K was well-below expectations, and the drop in the Unemployment Rate was aided by a shrinking labor force.

The report is especially disappointing in context of recent economic data.  Just yesterday, the ISM Services (AUG) report improved to its best level in nearly seven-years, and the Employment component of the report jumped to levels in recent seen when NFPs near +200K. Similarly, with Initial Jobless Claims holding near their post-2008 crisis lows, further signs of labor market resilience were expected.

Overall, the report takes away more than it offers for the second month in a row; in the sense that it means that the decision to taper QE3 in September has become that much more difficult for the Federal Reserve. While a September taper is still likely, the scope of which is probably diminished to a $10B cut in US Treasury purchases (rather than $15B ).

Here’s the key data driving price action ahead of the US cash equity open on Friday:

- Change in Nonfarm Payrolls: +169K versus +180K expected, from +104K (revised lower from +162K)

- Change in Private Payrolls: +152K versus +180K expected, from +127K (revised lower from +161K)

- Unemployment Rate (U3): 7.3% versus 7.4% expected, from 7.4%

- Underemployment Rate (U6): 13.7% from 14.0%

- Participation Rate: 63.2% from 63.4%

USDJPY 1-minute Chart: September 6, 2013

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