Although the non-farm payroll figure disappointed the markets, revealing a 235k growth vs 750k expected, the previous month's figure was revised up to 1053k. So, the average job creation in recent months is still at a level high enough for the unemployment rate to continue decreasing. The unemployment rate for August fell to 5.2% from 5.4% in July.
The drop in the number of jobs created was already being heralded by other indicators such as the ADP non-farm employment and the employment components of the manufacturing PMI. The fall in industrial activity due to supply chain bottlenecks and the delta outbreak are some of the reasons for the slowdown that has affected the labor market. But even so, the unemployment rate continues to fall. In any case, this is the data that the Fed has set itself as a target for its monetary policy.
Without ruling out the still problematic issue of price increases, inflation does not yet show clear signs of relaxation. The hourly average earnings component of the employment data published on Friday showed another rebound to 4.3% year-on-year, from 4.1% the previous month. These levels are well above averages and, together with the increase in the price of raw materials and logistics costs, they could cause more concerns for the Fed.
The proof that the employment data does not rule out Fed’s possible decision to reduce bond purchases is the performance of Treasury bonds. The 10-year bond, Tnote, after a rapid and short-lived upward move, ended the day with losses that raised its yield by 4 bps to 1.33%.
Although it might be true that the data could delay the decision of reducing bond purchases, the fixed income market does not seem to be affected by it.
However, the foreign exchange market, which is usually more sensitive to this type of data, was somewhat indecisive. The US Dollar, losing its correlation with treasury bonds yields, retreated, although not too much.
EUR/USD jumped to the main resistance zone at 1.1906, then reversed this path and returned to the starting point at 1.1875.
In short, we could observe a general lack of decision in the market when interpreting the employment figure. From now on this month, in addition to the statement from the Federal Reserve Meeting, the price components will be closely monitored in the leading indicators scheduled for publishing and the upcoming employment components.
Sources: Bloomberg, reuters.com.