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Dollar slides against euro as US job growth plummets to 142,000
US job growth came in way below expectations, with just 142,000 jobs added to the economy in August, compared with forecasts of about 230,000. It's the first time the US economy has failed to add over 200,000 jobs in seven months.
Job growth dropped by 79,000 between June and July, from 288,000 to 209,000, but today's figures demonstrate an even sharper fall of 88,000 between July and August.
There was far less drastic change in the unemployment rate, which only dropped from 6.2 to 6.1 per cent, in line with analysts' expectations. The total number of unemployed people in the US stands at 9.6m people.
The US dollar dipped 0.15 per cent against the euro in reaction to the news. Analysts had been expecting stronger jobs growth to reinforce the US dollar after the euro slid 1.302 against it yesterday.
Economist Robert Wood of Berenberg believes today's results should not overshadow the larger context of US economic growth.
Wood said:
There is no need to fear an imminent loss of momentum in America. The labour market is a lagging indicator of the economy and these data could very well be revised in future months.The latest survey readings from the US have been very strong, with the ISM manufacturing [index] rising to 59 and the non-manufacturing reading hitting 59.6. Payrolls should improve again next month, as super loose monetary policy and fading fiscal austerity continue to drive the economy forwards.
All eyes will now be on Federal Reserve chair Janet Yellen at the Federal Open Market Committee (FOMC) later this month, where she is expected to spell out the details of when the central bank could raise interest rates for the first time and will announce continued cuts to its asset purchases.
Ashraf Laidi, chief global strategist at CityIndex, said today's employment data will not affect the Federal Reserve's plans:
Interestingly, US equity futures are taking the news in their stride by not selling off as the unemployment rate slipped to 6.1% from 6.2%, but that is partly due the labour force participation inching down to 62.8% from 62.9%.Since average hourly earnings continued to rise, the report overcomes the notion of weak wage growth and maintains the Federal Reserve on course to taper its asset purchases at this month’s FOMC meeting.