Blue Point Trading - February 2014 Jobs report good – Fed steady as she goes


February 2014 Jobs report good – Fed steady as she goes. The US Bureau of Labor Statistics says 175,000 workers were added to nonfarm payrolls in February, well above Wall Street’s consensus estimate of 149,000. The unemployment rate unexpectedly rose to 6.7% from 6.6%. Labor force participation was unchanged at 63.0%. In general good news for the US economy and should reverberate to the global economy as a whole.

Highlights of the full report, included the following positive data points for February. Professional and business services increased by +79,000. Employment continued to trend up in temporary help services +24,000 and in services to buildings and dwellings +11,000. Wholesale trade added +15,000 jobs, with nearly all of the increase occurring in durable goods +12,000. Employment in food services and drinking places continued to trend up +21,000. Construction changed +15,000. Heavy and civil engineering construction rose by +12,000 in February. Health care changed +10,000.

On the negative side was retail trade employment, which changed -4,000 net. Among the component industries, a job gain in food and beverage stores +12,000, but was more than offset by declines in electronics and appliance stores -12,000; sporting goods, hobby, book, and music stores -9,000; and department stores -7,000. But still the net was not too bad.

Average hourly earnings rose 0.4% from the previous month in February, bringing year-over-year hourly earnings growth to 2.2% from 1.9% in January. This is pretty much matching the inflation rate, so no immediate fears of inflation or, a “hot economy” is on the horizon. So what are the next moves for the Fed and the Dollar?

There was some fear that the Fed might pause at their next meeting, but with this good February jobs report, it will be steady as she goes. They will cut another $10b off the current Fed QE programme. This gave a kick down for Bond prices and temporarily boosted the Dollar. Remember, higher interest rates generally gives a boosts to one’s currency. The ECB on the other hand with its dismal EU economy, is still asleep at the wheel, they did nothing, and kept their policy unchanged. This gave a boost to the Euro last week.

My thinking is that with all these positive Dollar events, and yet the Dollar really did not benefit much, more Dollar weakness is coming. When every you see good news for a market and the market does not seem to react to it, it means the market wants to go the other way. That being said, keep an eye on the Ukranian situation – it’s the black swan that could trump all.

[Blue Point Trading](Blue Point Trading), William Thompson