Market Wrap – Payrolls Beat Market Expectations

The market has reacted to today’s mixed Non-farm payrolls job report. The main point of contention for the market is the disparity between the headline number beat and the rise in the United States employment rate.

Markets have sold the US dollar and bought stocks after US unemployment rate rose to 3.7 percent in August of 2022, the highest since February and above market expectations of 3.5 percent.

The number of unemployed people increased by 344,000 to 6.014 million, while employment levels went up by 442,000. The labour force participation rate increased to a five-month high of 62.4 percent in August from 62.1 percent in July.

Markets watchers are observing that the implied odds of a 75-bps hike at the Sept 21 FOMC meeting were at 75% ahead of the data. USD/JPY was trading at 140.47 ahead of the numbers, which is the highest since 1998.

We are also seeing the EURUSD back above parity and the British pound remaining depressed against the buck. Gold is also fighting off the floor after yesterday’s near miss with the lows of the year.

Digging into the actual report itself he US economy added 315K payrolls in August of 2022, compared to a downwardly revised 526,000 in July but above market forecasts of 290,000 and pointing to broad-based hiring across many sectors.

The biggest job gains occurred in professional and business services, namely computer systems design and related services; health care, mainly offices of physicians, hospitals and nursing and residential care facilities; and retail trade.

The United States Manufacturing sector added 22,000 jobs, while leisure and hospitality added 31,000, following average monthly gains of 90K in the first 7 months of the year.

It should be noted that seasonality could be in play. August is historically a weaker month for employment, but nonfarm employment is now 240,000 higher than its pre-pandemic level in February 2020.