On Thursday forex traders received a rather big NFP report. As you know the NFP report is usually released on Friday’s, but due to the Independence Day holiday celebrated on Friday the report was moved to Thursday. Regardless of which day it was released, the June non-farm payroll report or NFP gave traders a very big headline figure of 288,000 jobs created in June.
Economists expected 215,000 jobs were created in June, but Wednesday’s strong ADP figure suggested a big upside surprise. This marked the fifth consecutive month where job gains were reported above 200,000. Keep in mind that roughly 150,000 new job seekers enter the labor force every month which means any number above 150,000 is actually creating a positive job scenario.
The unemployment rate dropped to 6.1% which as better than the 6.3% expected. Average hourly earnings matched expectations for an increase of 0.2% in June and an annualized increase of 2.0%. The annualized increase is essentially eaten away by inflation and marks a slowdown in wage growth compared to May. Until wages pick up the US labor market will remain under pressure and the US economy will not feel the benefit of new job creation.
The average hourly workweek remained unchanged at 34.5 hours and the labor force participation rate remained unchanged at a very disappointing 62.8%. In addition the US is losing full-time employment and is replacing it with part-time employment which is unsustainable for a strong economy. This trend continues to accelerate which means the US economy is likely to struggle over the next few generations.
This could further pressure the US Dollar which is trading at multi-month lows against other major currency pairs and this week’s strong NFP reports did not reverse course as the underlying weakness in the NFP report is far greater than the headline employment figure as well as unemployment rate. The US Dollar is expected to mount a short-term reversal rally before setting new multi-month lows.