Forex Snapshot: Global Jobs Update – Part I

Prudent forex traders are always up-to-date when it comes to market information, so if you’ve been falling behind on the latest jobs releases, make sure to check out the first part of my Global Jobs Update. Today, I’ll be talking about the jobs data for the U.S., the euro zone, the U.K., and Switzerland.

The U.S.

The U.S. jobs report for May shows that the reading for non-farm payrolls was better-than-expected at 280K (221K previous). The largest increase jobs was posted by the professional and business services sector, followed by the leisure and hospitality sector. All other industries saw job increases too, except for the mining and information services sectors, which lost 18,000 and 3,000 jobs respectively.

strong dollarMoving on, average hourly earnings went up by 0.3%, much better than the previous 0.1% increase but still quite lackluster. The jobless rate, though, was slightly disappointing since it went up to 5.5% from 5.4%, but this was mostly caused by a 397K increase in the civilian labor force and a climb in the participation rate from 62.8% to 62.9%.

Overall, the U.S. labor market seems to be doing okay, which could mean more demand for the Greenback. These jobs figures are also currently under the Fed’s radar, as Fed Chair Janet Yellen said in their latest FOMC statement that they were counting on improvements in the labor market and wage increases to keep growth and inflation supported. For now, a strong Greenback doesn’t seem to be much of a concern since Yellen said that “in spite of the appreciation of the dollar the committee obviously thinks that the economy is likely to do well enough to call, likely call, for some tightening later this year.”

The Euro Zone

The euro zone’s seasonally-adjusted jobless rate for the month of April slid down from 11.2% to 11.1%. Looking at the components of the report, we can see that Germany led the pack with a jobless rate of 4.7% while Spain and Greece were eating dust at 22.7% and 25.4% respectively. France and Italy, meanwhile, had their jobless rates at 10.5% and 12.4% respectively.

That’s great and all, but what does it mean for the euro? Not much, actually. Firstly, most forex traders appear to be more concerned with the Greek drama at the moment. Secondly, the euro zone is a monetary union of 19 European Union states with varying levels of economic performance so forex traders might just be focusing on the jobs data from the larger member nations.

The U.K.

The latest jobs data from the U.K. remained very promising and upbeat. The jobless rate for the February-April reporting period remained unchanged at 5.5%, but actually went down from 6.6% on a year-on-year basis. The average weekly earnings for regular employees also went up by a respectable 2.7% for the same reporting period, a decent improvement over the previous reading which was revised upwards to 2.3% from 1.9%.

It gets even better when one considers that CPI fell by 0.1% in the year to April 2015, which meant that buying power actually increased further due to cheaper prices.

The only disappointment was claimant count change, which decreased by a seasonally-adjusted 6.5K in May after April’s reading was revised to a 7.8K decline from a 12.6K drop. It’s still good because a drop means less people are claiming unemployment benefits, but it’s worrying that the drops have become smaller and smaller since the 39.4K drop back in January 2015.

This could be good for the pound in the long run since a solid labor market and increasing wages will promote consumer confidence and spending, which will ultimately cause higher inflation due to higher demand. As the Bank of England (BOE) stated in its latest MPC meeting minutes, “the path for UK monetary policy would depend on the prospects for inflation.”

Switzerland

As usual, Switzerland’s jobs data was a symbol of stability since the seasonally-adjusted jobless rate for May remained unchanged at 3.3%, which is really, really low. On an unadjusted basis, the jobless rate actually fell to 3.2% from April’s 3.3%, although only 192,798 job seekers were registered in May, which is lower than last month’s 199,346 figure.

Okay, great! Switzerland’s jobs data is very solid, so are we gonna see a strong Swissy or what? Not exactly. Remember, in its June 18 monetary policy statement, the Swiss National Bank (SNB) referred to the Swissy as “significantly overvalued” and then openly declared that it was ready and willing to “remain active in the foreign exchange market, as necessary, in order to influence monetary conditions.” Also, Switzerland’s economy relies more on foreign investments and exports, and not so much on consumer spending, so the fact that Switzerland has a solid jobs data does not necessarily mean a strong Swissy.

Based on the jobs data above, which currency do you think will be the strongest in the coming months? Cast your votes in our poll below!