US Sept. Employment report underwhelms, but details point to a more modest outlook

Today’s US September employment report came in weaker than consensus, surprising the market with a headline print of +148K versus expectations of +180K – Additionally, the prior monthly revisions were mixed, with August increasing by 24K and July seeing a subtraction of 15K (net revision +9K). Altogether, this sees the 6-month NFP average increase marginally to 162.8K from 160K. As a result US treasuries rallied, with the 10-year yield dropping from around 2.58% pre-NFP to 2.53% within a matter minutes and this saw the USD get hit – EURUSD broke to a new 2013 high (above 1.3710) as noted as a potential scenario yesterday: EURUSD hovers just below 2013 high ahead of US Sept. NFP report.


Yet again, a key bright spot in the report was the Unemployment rate which fell to 7.235% (7.2% rounded vs. expectations to remain at 7.3%), but more importantly unlike prior declines this occurred as the civilian labor force increased by 72K and the participation rate held steady at 63.2% – Thus, what the market and more notably the Fed wants to see form an unemployment decline. Additionally, we also saw a slight increase of 0.1% MoM in September hourly earnings and this suggests that consumption, while not stellar, may remain close to 2%.

Ultimately, this report does very little to sway the Fed from their current $85B a month pace of QE, as we are likely hear next week at their October 29-30th FOMC meeting. However, it was sufficient enough to keep October’s employment report relevant. Accordingly, market participants will now turn their attention to November 8th, which is when the next NFP report will be released. While a December Taper is possible, it appears highly unlikely that the data will support such a decision. Furthermore, US fiscal uncertainty will be prevalent once again and this leads us to believe a March 2014 QE Taper is most probable since it could be Janet Yellen’s first meeting as Fed Chairman and it will be associated with a summary of economic projections & press conference. That said, we would anticipate if QE is prolonged to this date then we may see a larger taper amount ($35-45B), rather than an initial $10-15B expected just a few weeks ago.

Источник: Forex.com

22.10.2013