The U.S. economy showed weakness last Friday when the latest U.S. Non-Farm Payroll report came in way below forecasts. Forex traders expected to see a 245,000 rise in net new jobs created, but were shocked to see only 126,000 added in March, as well as downward revisions to the January (from 239K to 201K) and February (from 295K to 264K) reads. Ouch!
Despite the disappointing net change in job numbers, the unemployment rate came inline with the expected and the previous read of 5.5%. This lack of change may be largely explained by the decrease in the labor participation rate (the percentage of working-age people who are: 1. employed or 2. unemployed but looking for work).
A closer look at the components of the report shows that the mining industry was the weakest (-30K in 2015 vs. +41K jobs in all of 2014). No surprise there as this component includes the recently ravaged oil and gas extraction industry, taking it to the chin thanks to falling oil prices. On the other end of the spectrum, food and drink services continued their recent positive trend by adding +9K jobs in March after a hearty +66K jobs were added in February.
Finally, USD bulls (and I know there are a lot of you out there) can take some comfort from the weak headline jobs number by checking out the average hourly wage number, which ticked up to 0.3% vs. 0.2% forecast and the 0.1% previous read. While it wasn’t a gangbuster improvement, this data point is starting to show life with recent reads above the 2014 average of around 0.1% gains per month. This is definitely a number to watch as it could be a leading indicator on future inflation.
What does it all mean?
It could mean something…or it could mean nothing. Sorry to be all wishy-washing on the subject, but keep in mind that this is only ONE weak month among a long string of strong jobs numbers going back deep into 2014. Maybe it was about time that we saw a sub-200K number and given another extreme winter environment in the U.S. over the last couple of months, this downtick probably shouldn’t be a surprise.
The downward revisions to the January and February numbers, and the continued decline in the labor participation rate (62.7% in March vs. around a 66.0% average pre-2008 crisis) are a bit concerning, but the declining trend in the weekly jobless claims (now settling below the 300K level) is a good sign that less people are losing their jobs.
So, was is really THAT bad? It’s probably way too early to tell, but I’m in the camp that’s going to sit back and wait for a few more employment reports to be bad before becoming a Dollar bear and pricing in a possible delay of the speculated rate hike by the Federal Reserve in 2015.
How about you? What’s your take on the March U.S. employment report? Don’t be shy to share your thoughts in our comments section!