NFP Review: More Reason for QE?

Ay caramba! The markets were “shocked” last Friday, as the results of the non-farm payrolls report showed job losses of 95,000. This was disappointing, as some experts had projected job losses of about 5,000. Apparently, despite the fact that private payrolls came in smoking hot at an impressive 64,000, census-related layoffs negated all of that and then some.

While the unemployment rate did remain steady at 9.6%, the outlook for the U.S. labor market ain’t looking like an In-and-Out burger. With last week’s ADP report showing the first decline in seven months, and with more census layoffs coming up, we may see more weakness in the weeks to come.

You see, the headline NFP figure wasn’t the only wet blanket in the report. Private payrolls, which many consider as the better gauge of the labor market, only rose by 64,000 in September. This was weaker than the 93,000 increase in August, and was still below what many consider the self-sustaining levels for a recovery.

The average hourly earnings also didn’t paint a pretty picture when it printed flat in September after showing stellar gains in July and August, and was only up 1.7% from September last year.

Lastly, the private payroll diffusion index that measures the distribution of payroll gains also fell from its previous 54.1 figure to the contractionary level of 49.8. Uh-oh. With these figures popping up in the US, will we see more QE groupies flood the markets?

Judging from the recent US dollar movement, another round of quantitative easing is exactly what most traders are thinking. However, there are still some Fed officials who remarked that further easing isn’t a done deal.

In an interview with CNBC, St. Louis Fed President James Bullard mentioned that the central bank might still hold off any drastic monetary policy moves until December as it waits for more U.S. economic figures. He admitted that the economy has showed signs of slowing but maintained that the data isn’t weak enough to warrant another round of QE.

Still, it’d be interesting to see how this recent NFP figure would affect the tone of the next FOMC statement in November. It looks like the question on almost every trader’s mind is “How low can the Greenback go?” and the September NFP report seems to suggest that the US dollar selloff ain’t over just yet.