The most laughable US jobs report in modern memory
By John J Hardy
This was one of the more laughable US jobs report in modern memory – so contradictory if we look at the full list of data points that it is tough to piece together a compelling takeaway, though the market wants to take this as a positive report in the immediate wake of its release.
First, the “Buy USD” algorithms were triggered by the large headline beat for the change in non-farm payrolls in April, which at +288k beat expectations by +70k and +81k if we add the small upward revision to the March data. But a glance over at the April Household Survey showed a net -73k jobs after a +476k reading in March – okay, it’s mean reversion, but the trend is not encouraging if we average the last several months together.
Then most absurd of all, April saw a wildly large drop in the participation rate by -0.4 percent to 62.8 percent to match the lowest readings for the cycle, after recent months seemed to show this measure might finally be ticking higher (would have been a good sign if the theory goes that the “discouraged worker” cohort is beginning to scratch around for jobs in a more encouraging jobs environment). The net result, despite the fall in the household survey’s payrolls level, the actual unemployment rate plunges all the way to 6.3 percent! If we maintained the 67 percent participation rate of the year 2000, we’d still have an unemployment rate of over 10 percent....
No matter, the market prefers to take this as a strong data point, as treasuries have slipped lower and the June 2015 Fed Funds contract is off three and a half ticks, but the survey isn’t strong enough across the board to move the Fed rhetoric just yet. Note also the 0.0 percent Average Hourly Earnings print for the month as well.
Let’s see if we can take out 1.3750 in EURUSD and 103.00 in USDJPY as well as 0.9150 in AUDUSD before drawing the conclusion that the USD will broadly strengthen on this report in the days ahead, which is less impressive than the headline suggests. The market’s focus will quickly shift now to next week’s European Central Bank meeting after Monday’s US ISM non-manufacturing survey.