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US Jobs Below Forecast – Can Upward Revisions Keep Fed in Play?

Published September 2, 2016
  • The US reported that payrolls grew less in August than forecasted, with 151k jobs created compared with 180k forecast
  • The unemployment rate held steady at 4.9%, as did the participation rate at 62.8%, while wages rose at a 0.1% pace compared with 0.2% expected
  • However, July's numbers were revised upwards to 275k from 255k previously reported, almost washing out today's 29k downward miss
  • Payrolls have now averaged 239k over the last 3 months, a stellar pace of growth which may be difficult for the Fed to ignore
  • To this point, the yield on the US 2yr bond is unchanged following the report, as the market still sees the potential for the Fed to hike in September (Chart 3)
  • Today's report certainly doesn't close the door on a September rate hike, and thus I expect currency valuations and relative bond yields to remain volatile as the market tries to figure out what the Fed is more likely to do
  • Meanwhile, Canada finally reported an improvement in its trade balance as the deficit shrunk to C$ -2.49B in July from a massive C$ -3.9B in June
  • This brings to an end to 5 months of consecutively larger trade deficits and comes on the back of a jump in exports – welcome news to just about everyone, coast to coast!
  • USDCAD is lower on the day as the Loonie benefits from higher oil, higher equity futures thus far this morning with the Loonie picking up about 0.5% on the greenback
  • Look for support at 1.3000 and 1.2965, initially, and resistance at this week’s highs of 1.3145 and the 200 DMA at 1.3286
     

Charts: (1) USDCAD pulls back to 55DMA. (2) US Payrolls strong over last three months. (3) US 2y yield unchanged. (4) Economic Calendar.