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Looking at the raw figures, employment figures released yesterday were, for the most part, rather positive. The unemployment rate dropped from 9.1% to 9.0%, its lowest level in 6 months. Under-employment also fell, while average hourly earnings grew by 0.2% last month.

Meanwhile, the only “disappointing” figure was headline nonfarm payrolls, which printed at 80,000 and was less than the forecasted 97,000. Take note that private corporations actually added 104,000 jobs last month, but government layoffs cut into this figure.

The good news though was that August’s figure was revised up (again!) to 104,000, up from the initial big fat zero, while September’s number was changed from 103,000 to 152,000. Boo yeah!

Still, even with the promising figures, there are those who remain skeptical about the state of the labor market and aren’t quite convinced about the recent run of jobs added to the economy. They point to the European crisis and U.S. budget deadline talks as reasons why companies may look to cut back on hiring as we enter the new year.

In addition, the current pace of job hiring isn’t nearly enough to pull down unemployment to acceptable levels. According to my super genius minions, NFP figures would have to print at 150,000 every month for a year just to bring down the unemployment rate by 0.50%.

In the currency markets, the market reaction was actually what we’ve come to expect – another fade on EUR/USD! After spiking higher following the release, EUR/USD dropped more than 100 pips over the next couple of candles before finding support. For those of you keeping count, this marked the 4th consecutive month that we’ve seen the initial move faded.

1-hour Chart of EUR/USD

The bigger issue on everyone’s mind now is what will the Fed do if this current pace of jobs growth continues? If you ask me, Operation Twist was implemented to merely buy more time for Fed officials, many of whom are praying for a faster pace of improvement. Take note that in their statement earlier this week, Fed officials downgraded their GDP and jobs growth forecasts for 2012, which means that they are actually expecting more obstacles ahead.

I believe this is a big indication of what direction the central bank is leaning towards. In fact, all it might take for Fed President Ben Bernanke to finally pull the QE3 trigger is just one dismal month of NFP figures. Over the next few months, I expect the Fed to slowly change the language of their FOMC statements and prepare market players for more easing measures down the road.