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Weakest NFP in more than five years

Market Analysis

USDJPY, Daily       

US nonfarm payrolls increased only 38k in May following a 123k increase in April (revised down from 160k) and a 186k jump in March (revised from 208k), for a net -59k revision. The gain last month was the smallest since September 2010. But, the unemployment rate fell to 4.7% from 5.0%, the lowest since November 2007. The labor force plunged 458k after April’s 362k drop, while household employment bounced 26k from -316k. The labor force participation rate slid to 62.6% versus 62.8% previously. Earnings were up 0.2% compared to the prior 0.4% gain (revised from 0.3%). The workweek was flat at 34.4 (April was nudged down from 34.5). Private payrolls increased 25k, with the goods producing sector seeing a 36k drop, while construction fell 15k, with manufacturing down 10k. Service sector jobs increased 61k, led by a 67k jump in education/health. Government added 13k. Though the data is very noisy, in part due to the Verizon strike, it will be difficult for the FOMC to make a tightening case with these numbers.

 The dollar fell sharply following the big NFP miss, which came in at roughly 1/4 of expectations. Earnings and average workweek data were in-line with forecasts. EURUSD rallied over 100 points to 1.1270 from 1.1160, as USDJPY collapsed to nearly one-month lows of 107.79 from 108.85. Equity futures have turned marginal gains into moderate losses, while yields moved significantly lower.


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Stuart Cowell

Market Analyst 


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