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US Storm-Skewed Report Means Nothing about Anything

United States

US interest rates and the dollar rose in response to the data. It was firm before the report. The US Dollar Index is up for a fourth consecutive week. It is the longest streak since Q1. US 10-year yields are near 2.40%, an area that has blocked stronger gains for nearly six months.

Nonfarm payrolls

The storms that hit the US had a greater impact on the US labor market than many expected. The recorded a net loss of 33k jobs in September, whereas the market had largely expected around half of the year’s average.

U.S. Nonfarm Payrolls, Sep 2017

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U.S. Nonfarm Payrolls, Sep 2017

Source: Investing.com - Click to enlarge

Participation Rate

 

U.S. Participation Rate, Sep 2017

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U.S. Participation Rate, Sep 2017

Source: Investing.com - Click to enlarge

Unemployment Rate

However, the market is looking past the headline and sees the drop in the unemployment rate to 4.2% from 4.4% and the underemployment rate to 8.3% from 8.6%, new cyclical lows. Yet this too may be skewed. The Bureau of Labor Statistics reported that 1.49 mln people would not go to work due to the weather.  This is the most in two decades.

U.S. Unemployment Rate, Sep 2017

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U.S. Unemployment Rate, Sep 2017

Source: Investing.com - Click to enlarge

Average Hourly Earnings

Hourly earnings jumped 0.5% in September to 2.9%. This is the strongest pace since June 2009. We worry this too may be distorted. However, what most assuredly has not been skewed was the upward revision to the August series. It was revised to 2.7% from 2.5%. To the extent that there is a signal from this noisy data, this is it: There is slightly greater upward pressure on wages than previously understood. To be sure, it still lags behind other cycles, and it will take more than one or two months data to revive talk of the Phillips Curve, which links the employment to inflation.

U.S. Average Weekly Hours, September 2017

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U.S. Average Weekly Hours, September 2017

Source: Investing.com - Click to enlarge

Canada

Canada’s jobs report was not skewed by the weather, but it appears to be having its own quirkiness. After losing 88k full-time jobs in August, it gained 112k in September. Part-time jobs were volatile in the other direction. Remember, as simply rule of thumb, Canada is 1/10 the size of the US. This illustrates the volatility of Canada’s data.

The main takeaway from today’s North American jobs report will reinforce what the market was already expecting. The Fed will most likely hike rates in December, while the Bank of Canada is in no hurry to hike rates this month, which would be the third consecutive hike.

 

 

Canada Employment Change, September 2017

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Canada Employment Change, September 2017

Source: Investing.com - Click to enlarge

The unemployment rate was unchanged at 6.2%, while the participation rate slipped to 65.6% from 65.7%.

Canada Unemployment Rate, September 2017

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Canada Unemployment Rate, September 2017

Source: Investing.com - Click to enlarge

 

Canada Participation Rate

Canada Participation Rate, September 2017

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Canada Participation Rate, September 2017

Source: Investing.com - Click to enlarge

 

Full story here
Marc Chandler
He is Global Head of Currency Strategy of Brown Brothers Harriman (BBH). He has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. He regularly appears on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. BBH provides specialist services and innovative solutions to many Swiss asset managers that include a global custody network of close to 100 markets, accounting, administration, securities lending, foreign exchange, cash management and brokerage services. Feel free to contact the Zurich office of BBH
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