Weak Jobs Growth Barely Shakes USD

Weak Jobs Growth Barely Shakes USD

  • Wages More Important to Traders Than Job Creation;
  • China Prepared for New Counter-Tariffs.

It’s not often that the see a miss of around 88,000 in the US job creation figures and markets shrug it off but that’s exactly what we’ve seen today.

The US jobs report was somewhat overshadowed this week by the ongoing back and forth between the world’s two largest economies which has threatened to disrupt the period of strong growth the global economy is seeing. Despite that, traders as ever were paying very close attention to the data release and were clearly unmoved by what they saw, despite the NFP number being well below expectations.

Was this a sign that traders are only interested in trade wars right now as opposed to the economic data? I don’t think so. I think this is a sign that the component of the report that traders are focused on has changed, with average hourly earnings now being of far more interest. Unemployment is very low and whether that’s 4.1% or 4% doesn’t make a huge amount of difference, the economy is on a very good trajectory and with the passing of tax reforms, it will get there some time soon.

Inflation on the other hand is certainly not guaranteed and traders are looking for clues that, given the apparent tightness of the labour market, inflationary pressures are building. The average hourly earnings component of the report offers some insight into this as higher earnings are typically associated with higher inflation. They were in line with expectations on an annual basis at 2.7% and slightly ahead on a monthly basis at 0.3%, which may explain why the dollar slightly weakened after the release before returning to pre-report levels shortly after.

With the jobs report out of the way and holding no surprises of substance, focus will now shift back to trade wars, with the Chinese Commerce Ministry shortly after the jobs data claiming that they have a fully prepared response to Trump’s proposed tariffs. They also claimed negotiations can’t be conducted under these conditions and none have taken place recently. This is more significant than today’s jobs data and is likely to have a greater impact on the markets going forward.

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