US Jobs Growth Ebbs

Daily Analysis - 08/02/2016

Nonfarm Employment Gains Miss Estimates By Wide Margin


Nonfarm payrolls added jobs at a rate less than what was expected for the month of January even though unemployment surprisingly dipped to the lowest levels reported since 2008. The recent mixed results will see investors focus on Federal Reserve Chair Janet Yellen’s Testimony later in the week with a hawkish speech anticipated to show the US economy remains robust despite global economic turmoil.

German Factory Orders Nosedive

German factory orders dropped back into negative territory after having climbed to 1.50% in November. According to the German Federal Ministry for Economic Affairs and Energy, factory orders reportedly declined by -0.70% during December, missing estimates of -0.50% contraction. Euro Area orders slid by -6.90% while orders outside the Euro Area climbed by 5.50%, likely benefited by the weaker Euro. Intermediate goods dropped by -2.00% alongside domestic orders which shrank by -2.50% over the same period. German companies are not as fearful about the outlook as evidenced by the combination of recent statistics and low unemployment that will hopefully reflect a spur in demand. Worries arise from Germany’s fourth biggest trading partner, China, amid concerns that tapering GDP growth over the current year may have consequences for the Germany economy.


US Payrolls Slide

The latest data delivered by the Bureau of Labor Statistics showed that United States nonfarm payrolls rose by 151,000 in January after December’s blistering employment figure was revised downwards to 262,000 added in the previous month. Friday’s figure missed expectations of 190,000 positions created by a wide margin, underlining the cumbersome and even recovery process. Nevertheless, the unemployment rate fell to the lowest value since February of 2008, dropping to 4.90% from the relatively stable 5.00% reported over the last few months. The majority of the gains were attributed to food and drink services, with part-time jobs the main driver of job creation at present. The labor economy appears to show increasing signs of weakness in the manufacturing and services sectors as indicated by the latest data. The dollar has reversed marginally since the reopening, but weakness propelled gold prices to their highest levels in months, nearly reaching $1175 before retreating.


Canadian Unemployment Rises

Statistics Canada gave further credence to the ongoing challenges faced by policymakers after January employment figures showed additional job losses in the economy. According to the employment change figure reported on Friday, 5,700 jobs were lost during the month of January, missing estimates of 5,500 and falling below the prior month when 1,300 individuals were hired. Unemployment also unexpectedly rose slightly to 7.20%, printing below both the previous month and estimates of 7.10%. The plunge in oil prices continues to reflect negatively on energy exploration and production firms, with costs minimization coming as a result of cutting the headcount. Alberta reported the highest declines, with 10,000 jobs lost and the regional unemployment rate rising from December’s 7.00% to 7.40%. Economists expect sustained layoffs in the oil patch as weak earnings and expectations of further reductions in spending are forecast to impact employment.


Japan Reports Another Surplus

Japan reported another current account surplus for the month of December, marking the 18th consecutive surplus figure as exporters benefit from a weaker Yen. The excess was reported to be at ¥961 billion, falling below both expectations of ¥987 billion and the prior month’s figure of ¥1.144 trillion. In spite of recording a surplus in the latest period, December’s result was at the lowest level in six months, reflecting a shrinking export economy and slowing domestic demand. Broadly speaking, 2015 saw exports rise by3.50% while imports shrank at pace of -8.70% on an annualized basis.  Since the nuclear disaster in 2011, Japan has been relying heavily on oil imports.  However, the oil price slump has seen deficit turn to surplus despite the growing risk of deflation. While the Yen is sliding once more after the prior week’s massive uptick, renewed risk aversion could see gains in USDJPY reverse quickly.


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