The US dollar has pulled back across the majors as US non-farm payrolls fell more than expected in August by 84,000, marking the eighth consecutive month of contraction in US job growth. Perhaps even worse than that, the unemployment rate surprisingly rocketed to a nearly 5-year high of 6.1 percent from 5.7 percent.
On the other hand, average hourly earnings actually picked up 0.4 percent during the month of August, pushing the annual rate up to 3.6 percent from 3.4 percent. The data provides a very skewed picture to the Federal Reserve, as employment growth slows but wages pick up. This will stir fears amongst the FOMC members that surging food and energy prices over the summer has led the public's inflation expectations to rise and thus, has lead them to demand higher wages. It is this "wage price spiral" that any central banker fears most, and as a result, the Federal Reserve is likely to continue sounding hawkish in the commentary.
Nevertheless, the sentiment that may ultimately feed through into the US dollar is that the central bank is unlikely to take action anytime soon, as employment conditions are weaker and threats to US economic growth as rising.
Related article: US NFP And Canadian Employment Data Leverages A USDCAD Setup
Source: Bloomberg
Written by Terri Belkas, Currency Strategist of DailyFX.com
E-mail: tbelkas@dailyfx.com
US NFPs Fall For Eighth Consecutive Month, Unemployment Rate Surges To 5-Year High
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