Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Weak US Payrolls - Goldlilocks to Feel the Chill

Economics / Analysis & Strategy Feb 03, 2007 - 12:43 PM GMT

By: Ashraf_Laidi

Economics Just as the term "Goldilocks" becomes the latest buzz in economic headlines, the real data are gradually leaning to the softer side, allowing Goldilocks to finally feel the cold as more seasonal temperatures start to erode the aberration from abnormally warm weather. But it is not all about weather. The FOMC has finally reduced its preoccupation with inflation at the same week when manufacturing indices dropped back into recessionary levels. The stronger than expected advanced Q4 GDP tells an incomplete tale on a quarter that is already behind us. Softer than expected payrolls and rising unemployment rate both merit closer scrutiny.


The softer than expected reading in the February payrolls triggered short-lived declines in the US dollar, until the currency reversed its losses on rumors that the European Central Bank is considering halting its tightening cycle after an expected move in March to 3.75%. Eurozone interest rates are currently priced for two 25-bp rate hikes to 4.00% by year-end. The reports suggest the ECB could pause for months after a March rate hike as it faces uncertainty with Germany's VAT hike. EURUSD plummeted by a full cent (from 1.3064 to 1.2965), USDJPY lifts from 120.65 to 1213.30 before stabilizing at 121.

US payrolls were revised higher by a total of 933K last year, while the November and December figures were revised up by a net increase of 81K. The unemployment rate rose to a 4-month high of 4.6%, while average hourly earnings edged up 0.2% m/m and 4.0% y/y. Setting the annual revisions aside, manufacturing shed a net of 16K jobs following a drop of 18K in December, posting the 7 th straight monthly net loss. Service jobs saw the net increase in payrolls cut by half to 104K, the lowest reading since October 2005. Retailers created a net increase of 4K jobs after a drop of 14K, while professional and business services, education/health and government jobs all saw slower job creation.

The chart below shows the 3-month average for payrolls in manufacturing, construction and services, with the former two showing some signs of stability while services weakening. It is unclear to what extent were the two monthly increases in construction jobs attributed to warm temperatures. But the chart below, shows that the deterioration in US manufacturing continues could raise reasons for concern in the event of prolonged increase in oil prices.

As the unemployment rate hits a 4-month high at 4.6%, and sector payrolls weaken further, the onset of incoming rate cuts can be closer than is perceived-- particularly given the Fed's past inclination to cut interest rates at times of rising jobless rate . Although market liquidity remains ample-despite the increase in real interest rates and the unemployment rate, global liquidity can be reduced by events such as unwinding of carry trades and a gradual run up in rate hike expectations in Japan.

A 4.7% unemployment rate later this quarter should be a strong signal of an incoming rate cut, as early as May. After all, the Fed finally succumbed to the latest evidence of softer inflation figures and reduced its preoccupation with price pressures. Meanwhile, with both the Chicago PMI and ISM manufacturing in contraction territory at 4-year lows, the goldilocks economy may be starting to feel cold as markets get over the aberration of unusually warm temperatures.

By Ashraf Laidi
CMC Markets NA

Ashraf Laidi is the Chief FX Analyst at CMC Markets NA. This publication is intended to be used for information purposes only and does not constitute investment advice. CMC Markets (US) LLC is registered as a Futures Commission Merchant with the Commodity Futures Trading Commission and is a member of the National Futures Association.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in