The September non-farm payroll release surprised to the upside, showing a gain of 103K, a figure that was a good deal above the consensus forecast of 60K. Also the August figure was revised upward from zero, or flat growth, to show a gain of 57K. July's payrolls were revised higher by 42K.
We do have to take account for 45K Verizon workers returning to their jobs in September which inflated the September number (though it also depressed the August reading by the same amount). Relatively speaking then, this is a very good report, considering the concerns market participants have had recently about the US economy sliding back towards a double dip recession.
Private sector jobs rose by 137K, continuing our trend in which government jobs are shed this month to the tune of 34K. unemployment rate remained at 9.1%, while the average hourly earnings rose by $0.04 to $23.12. The manufacturing sector shed 13K jobs while the services producing sector gained 85K jobs.
The news likely lessens the pressure on the Federal Reserve to follow-up Operation Twist with further monetary easing in the form of quantitative easing. It also shows that businesses were more resilient through the past month, where we have seen turmoil in financial markets and concern about financial stress in Europe.
Still, US labor market is not showing the pace of job growth needed to protect in the unemployment rate, as since April payroll gains averaged 72K a month.
USD Weakens as Better Report Boosts Risk Appetite
The US dollar was weaker against the higher-yielding rivals, including the euro, Australian dollar, Canadian dollar as this report help to boost risk appetite in equities and in the currency markets. If the outlook for the US economy is not as bleak as market participants have been led to believe, could help to spark a rally in risk assets. Even in the emerging markets the developments in the euro zone and in the US economy will play a crucial role, and therefore this report is a shot optimism for these growth linked currencies.
We had already been at in the middle of a risk appetite rallied throughout most of the week as European leaders seem ready and willing to coordinate in recapitalizing banks, the we still have some issues to iron out between France and Germany and we've had the ECB and Bank of England bring out extra stimulative measures in order to help faltering recovery in both of those economies.
Where are last week a risk rally was based mainly on hope and optimism, we come back from this weekend we may actually have better fundamental reasons for gains in riskier currencies as well as global equities. But barring that we don't have any nasty negative developments in the euro zone over the weekend.
Therefore are bias should be towards buying a higher yielders at the expense of safe haven currencies as we make our strategy us plans for next week's trading.
Chief Market Analyst