The monthly US Non-Farm Payrolls report has a well-earned reputation for creating volatility in global financial markets, but even high-impact data is occasionally a dud.
As we anticipated in yesterday’s NFP preview report, the headline jobs figure did come out on the high side of expectations. According to the BLS, the US economy created 196k jobs in the month of March, topping economists’ estimates of 180k; the previous two jobs reports were also revised higher by a total of 14k.
While the headline quantity of jobs created was solid, the crucial wage component missed expectations. Average Hourly Earnings rose just 0.1% m/m, bringing the y/y rate down to just 3.2% from 3.4% last month. The fact that the wage growth remains subdued even as the US economy continues to add nearly 200k jobs per month almost ten years after the Great Financial Crisis signals that there is still slack in the labor market.
At the margin, today’s mixed jobs report supports the Fed’s big dovish shift last month. In other words, there is no urgency for the Federal Reserve to raise or lower interest rates, given that the economy continues to grow, there’s no evidence of an imminent pickup in inflation, and policymakers’ belief that interest rates are near neutral levels.
Market Reaction
Markets have taken today’s mixed jobs report in stride. Fed Funds futures traders continue to price in about a 50% chance of an interest rate cut this year (see below). The US dollar, US stock indices, gold, and 2-year treasury yields are all trading within about 0.1% of pre-NFP levels.
The only noteworthy move is in USD/CAD, where the Canadian economy got a mixed jobs report of its own and oil prices generally ticked higher. Taking a step back, the pair continues to consolidate in a symmetrical triangle pattern. Given the lack of clear trend heading into the pattern, the direction of the ultimate breakout is difficult to handicap, but we could see a 200-pip continuation if rates break above last week’s high near 1.3450 or this week’s low around 1.3300.
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