Instead of the expected over 500 thousand new jobs in the non-farm sector in the USA were created by half less. The positive information seems to be the drop in unemployment.
The unemployment rate in the USA fell in November by 0.4 percentage points, from 4.6 percent (October) to 4.2 percent (October). The market expected a drop to 4.5 percent. Meanwhile, the reading turned out to be more positive, and the lowest since February 2020.
The number of unemployed people in the US fell by 542,000, to 6.9 million. However, that's still 1.2 million more people out of work compared to 5.7 million unemployed in February 2020. Meanwhile, the labor force participation rate rose to 61.8 percent in November, which is 1.5 percentage points lower than in February 2020.
The main data in the form of NFP showed an increase of 210,000 in non-farm employment. The gains occurred in professional and business services, transportation and warehousing, construction and manufacturing. Retail trade was characterized by a decrease in employment.
Dollar reaction to the data
After the publication of the data, the EUR/USD exchange rate reached the daily highs at 1.1333, from where it seems to be quickly turning back. The first weakening reaction of the dollar may have had to do with the slightly worse main reading, the aforementioned NFP, but the unemployment rate or the nearly 5% increase in wages may be factors strong enough for the Fed to decide to normalize monetary policy. After the US data, the interest rate market may be pricing that the first rate hike in 2022 could take place in June and the next in November.
Stock markets seem unmoved
The US stock market, which is trying to recover from the recent correction, does not seem to react to today's data release. This week, the Nasdaq 100 index is trying to maintain the level from the previous close, while the Dow Jones seems to be fighting against a weekly loss of 0.55%, and the S&P 500 with a decline of just over 0.2%. The DJIA index, in turn, is trying to stay above the 200-session average, which falls in the area of 34480 points.
The NFP reading may close out a very busy week for markets, but in turn opens up anticipation for the Federal Reserve's upcoming decision on interest rates and the QE program along with the latest macroeconomic projections. The Fed will hold its meeting on December 14-15 and emotions may run high then.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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