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Last Friday, the non-farm payrolls came in and shook up the markets, as only 54,000 jobs were lost last month, which was roughly half the early projection of 104,000. What caused the sudden drop in firings? Believe it or not, we must give credit to the beloved private sector!

The data revealed that the private sector added 67,000 jobs this past August, beating the forecast of 42,000. What’s more is that July’s figure, which initially printed an increase of 71,000, was revised up to 100,700! Way to go private sector! Now give yourself a pat on the back…

But wait! Hold on the celebrations folks!

Despite the great news, I can’t help but feel that this may just be a knee-jerk reaction. Perhaps traders were just finding a reason to celebrate. After all, it’s only natural for people to be giddy after seeing months of depressing employment data.

After doing a little digging myself, in no way whatsoever am I impressed with the latest numbers when put it into context.

If you compare the current employment slump to that of previous recessions, you’ll see that this is the worst yet. Sometime last year, job losses hit a new high and recorded an over 6% drop in jobs from when employment peaked in 2007. Now, the decline has improved slightly to around 5.5%. But prior to this, the worst the US had gone through was back in 1948, when the job market experienced a 5% drop from peak employment. Who would’ve thought that the current employment situation is actually worse than post World War II?!soldier1.png

With how poorly the US economic fundamental outlook is looking, it seems that risk aversion isn’t enough to give the dollar support. Right after the release of the NFP report, the currency was sold-off like ice cold lemonade on a hot summer day.

Take a look at USD/JPY. While the pair did manage to rally on a positive figure, it soon dropped once traders and investors digested the contents of the NFP report. After rising above the 85.00 handle, the pair quickly fell back to its opening price that day. The number of people who want to hold on to the dollar: zero.

The truth of the matter is that the US labor market is in poor shape. There is some “good” news, but overall, the situation is pretty bleak. Until people see some convincing and sustained signs of improvement in the labor market, it looks like the yen will continue to be the favored currency of traders.