• NFP employment change 223k vs 189k exp
  • Average earnings Y/Y rises to 2.7% 
  • Trump tweet impacts market reaction

The monthly payrolls numbers from the US always feature prominently on Trader’s radars and today’s release was even more keenly anticipated following a well-time Trump tweet. The US president posted on social media not long before the release, stating that he was “looking forward” to the numbers and he wouldn’t have been disappointed with a strong headline print above 200k beating expectations, wage growth ticking higher and the unemployment rate falling to an 18-year low.

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 Trump took to social media to comment on the data not long before it was released. Source: Twitter

Given the weakness seen in this week’s ADP number (178k vs 191k and prior revised down by 39k to 163k) there was some suggestion that we could be in for a disappointment this afternoon. The ADP and NFP have historically shared a fairly good correlation, but for today’s data it served as a pretty poor gauge. A better giveaway was in fact Trump’s tweet and seeing how White House officials are typically given access to the monthly employment data the day before the reports are released publicly it is highly likely that Trump knew the figures were good before he posted. 

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 For the latest NFP  release the ADP didn’t provide much insight, with Trump’s tweet proving a better indicator. Source: XTB Macrobond

Whilst the headline number is no doubt pleasing and marks a return to 200k+ prints after consecutive misses this reading traders often look to the wage component for signs of an increase that may more rapidly impact inflation and therefore Fed policy. There was more good news on this front with Average earnings in Y/Y terms rising to 2.7% as expected, from 2.6% last time out. An important note to make on this point is that average hourly earnings for production and non-supervisory employees (which count for 82% of the private-sector workforce) rose 2.8% Y.Y – its fastest pace of growth since July 2009. 

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 Wages have risen once more with average earnings close to its highest level in recent years and the figure for production & non-supervisory employees hitting recent highs. Source: XTB Macrobond

A final point to be made on the release was the unemployment rate fell to its lowest level since 2000 in coming in at 3.8% – the actual figure was 3.7545% unrounded which is very close to a 3.7% print to 1 decimal place. This seems like another positive aspect of the report although looking more closely it is apparent that the decline comes about fully due to a slip in the participation rate. 

Despite what seems like an all-round solid jobs report the market reaction has been a little mixed – perhaps due to pre-positioning on the Trump tweet. If we look at the EURUSD for instance the market is actually back to pretty much the same level that it traded ahead of the release. The initial reaction saw a drop of around 25 pips but after the M1 candle closed there has been no follow-through lower. 

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 EURUSD dropped on the release but has failed to follow-through to the downside and 45 mins later trades back near its pre-release levels. Source: xStation 

Elsewhere, Gold has fallen to its lowest level of the week below 1290 in the last hour and the US500 has moved to its highest level of the day ahead of the Wall Street open.