According to the widely-expected nonfarm payrolls report, 1.5mn people stayed out of work due to dangerous weather conditions in September, dampening the number of jobs added to the economy. This, however, was not the biggest surprise, as investors had been warned about the negative consequences arising from the devastating hurricanes. What was instead a more unexpected fact, was the upside change in wage growth which consequently pushed the dollar to fresh highs and boosted confidence in the US economy. In the meantime, the Gulf of Mexico is threatened again by another tropical storm, with oil prices giving up their yesterday’s gains.
Hurricanes Harvey and Irma indeed dragged US nonfarm payrolls down, though, the impact was more negative than expected as the number of workers employed during the previous month declined by 33,000 instead of increasing by 90,000 as analysts estimated. In comparison, August’s mark of 169,000 was upwardly revised from 156,000. In the private sector, 40,000 people were out of work.
On the other hand, weather distortions did not influence the unemployment rate as the rate considered people missing their jobs as employed. The figure fell surprisingly to a sixteen year low of 4.2%, while forecasts were for the figure to remain steady at the previous mark of 4.4%.
Good news also came from average earnings, with workers enjoying an increase of 0.5% m/m in their average hourly payments in September, following a rise of 0.2% in August. On a yearly basis, wages jumped by 0.2 percentage points to grow by 2.9%, approaching the 3.0% needed for inflation to reach the Fed’s 2.0% target according to analysts.
The participation rate rose from 62.9% to 63.1%, the highest level seen since September 2013.
In the wake of the labour data, the dollar index surged to a 2 ½ -month high of 94.50 before it slipped back to 94.15, being 0.24% up on the day. Dollar/yen also touched a 2 ½ month high at 113.40, making a daily gain of 0.47%. Dollar/swissie was up 0.40% at a 3 ½-month high of 0.9816.
In Canada, September’s labor report revealed that the economy added lower jobs than expected as the increase in full-time positions slightly offset the significant reduction in part-time jobs. Particularly, part-time positions experienced the largest drop ever seen, dropping by 102,000 after rising by 100,400 in August. In contrast, 112,000 people became full-time employers – the highest time since 2006 – following the departure of 88,100 persons in the previous month and adding 10,000 people to the labour force. The Canadian unemployment rate stood flat at a 9-year low of 6.2%.
Dollar/loonie struggled to gain ground, retreating to 1.2556 after it peaked at a 5-week high of 1.2597.
Euro/dollar was trading weak during the session, pulling to a 9-week low of 1.1668 in the wake of the US nonfarm payrolls. Still, it managed to edge up to 1.1692 afterwards.
Meanwhile, the Catalonia’s head of foreign affairs, Raul Romeva, speaking on BBC on Friday, said that the region’s parliament would decide on breaking away from Spain on Monday despite the Spanish Constitutional Court banning the parliamentary session from going ahead. This could potentially lead to more scenes of violence in the region. The Spanish Prime Minister, Mariano Rajoy, will meet with ministers later today as tensions remain high, with two large banks already planning to reallocate their operations elsewhere in Spain to avoid any negative economic effects due to ongoing tensions.
A better than expected September Halifax house price index reading out of the UK did little to boost sterling as May’s leadership was in doubt after a disappointing speech at the Conservatives’ annual conference, with former Conservative chairman calling her to step down. However, May’s statement of providing "a calm leadership" provided some short-lived gains to the currency before it dived to a one-month low of $1.3024 – the pair was last at $1.3041.
In commodities, oil prices reversed yesterday’s gains as energy producers shut down their operations in the Gulf of Mexico ahead of the tropical storm Nate which heads towards the region after causing fatalities to a number of Central American countries. WTI crude lost 2.89% of its value during the day, last trading at a three-week low of $49.42 per barrel, while Brent retreated by 2.26% to $55.73.
Gold approached a two-month low of $1,260.43 per ounce before it bounced back to $1,265.35.
