There is nothing good that can be said about the US jobs data. It was simply dreadful. Every metric disappointed, and the August series which so often is revised higher, came in lower. This will raise fresh doubts about the US economy and the ability of the Federal Reserve to raise rates, not just this month, but this year.
Nonfarm payrolls rose by 142k, well below expectations for a 200k increase. With the downward revision in August to 136k, it is the second consecutive month below 150k, which has not been experienced since May-June 2012.
The unemployment rate itself was unchanged at 5.1%. However, it is marred by the decline in the participation rate to 62.4%, a new cyclical low. The fall in the participation rate also takes some of the gloss over the fall in the wider measure of (U6) fell to 10.0% from 10.3%.
Average hourly earnings were flat. The consensus expected a 0.2% increase. This kept the year-over-year pace unchanged at 2.2%. The consensus was for a cyclical high of 2.4%. The upward revision in August to 0.4% from 0.3% is next to meaningless in this context.
Adding insult to injury, the average work week slipped six minutes to 34.5 hours. This is where it has averaged in recent months, reversing the tick up to 34.6 hours seen in August.
The market’s response has been sharp. The dollar has been sold off across the board and US yields have fallen dramatically. The euro rallied to almost $1.1325, which is retracement target. A break above could spur a move toward $1.1450. The dollar has broken out of the symmetrical triangle pattern against the yen to the downside. A close below JPY119.20 is needed to confirm the breakout. The 10-year bond yield has approached the 1.90% level which was last seen in the mayhem on August 24. The S&P 500 futures have tumbled, with opening losses to likely be in excess of 1.0%.
The shockingly poor data will make upcoming numerous Fed official comments, including Fischer later today, all the more important. Most observers did not expect an October move in any event. Officials may reassure that the Fed is looking at the larger picture, but it will take firmer employment data to convince a skeptical market.