Strong November NFP: Go Signal for the Fed to Taper?

Surprise, surprise! The U.S. released another impressive NFP figure for November, but is the labor market really recovering? Here are the main takeaways from the latest jobs release.

1. The U.S. economy has regained about 7.4 million jobs since the recession.

Thanks to the stronger than expected increase in hiring of 203K for the month of November, the U.S. economy is another step closer to recovering most of the 8.7 million jobs lost during the 2008 global financial crisis. Even though the October figure was revised down from 204K to 200K, the labor market has been adding a monthly average of 190K jobs since August!

2. The jobless rate is at its lowest level since November 2008.

Aside from the higher than expected NFP figure, the improvement in the jobless rate also gave dollar bulls another reason to party! The unemployment rate ticked a few notches down from 7.3% to 7.0%, beating the consensus of a 7.2% reading and reaching its five-year low. So much for worrying about the negative effects of the recent government shutdown!

3. The participation rate is at a record low.

However, one important factor to take note of is the continuous decline in participation rate. As of November, only 63% of the American labor force have jobs or are actively looking for one. Some analysts attribute the downtrend to the retirement of Baby Boomers, but some can’t help but notice that a lot of employable individuals are simply giving up hope in finding work.

4. December taper expectations are very high.

Despite persistent weaknesses in underlying labor indicators such as the participation rate, several market watchers seem to be betting on a December taper. After all, Fed officials have mentioned that they could start reducing bond purchases as soon as the labor market shows a sustained recovery.

With that, the U.S. dollar might keep gaining ground right until the last FOMC monetary policy statement for the year. Do keep in mind though that a buy-the-rumor-sell-the-news phenomenon could take place, as strong taper expectations could be priced in days ahead and that the potential for disappointment is also very high.

2 comments

  1. Pingback: 3 Reasons Why Yen Pairs Could Keep Rallying | Forex Blog: Piponomics

  2. Pingback: The NFP & Long-Term USD Price Action

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