On the face of it, today’s US jobs report gave lots to write home about, with a payrolls figure well above that crucial 200,000 mark, along with the lowest rate in unemployment in seven years. However, dig a little deeper and things are not as rosy as first thought. Most notably, the doves will be focusing in on the revision to March’s payrolls number, which went from bad to worse, undergoing a substantial revision lower – from 126,000-85,000. Add to that a fall in both March and April’s average earnings number and we are looking at much more of a mixed report than first meets the eye.
The inconsistent nature of this report has played perfectly out in the currency markets, with the major dollar denominated currency pairs seeing initial weakness for the dollar turn into gains, to finally settle back at square one. Fortunately, the equity markets knew to take it, with the Dow Jones, Nasdaq and S&P 500 spiking higher from the news.
Ultimately, the ability to avoid another sub-220,000 payrolls number is the story of the day, as it puts to bed the idea that last month’s report was more than just a one off. Janet Yellen reminds us that she can raise rates at any given meeting, yet should we have seen another weak payrolls number it would surely have played into the idea that the first hike will be in the back end of the year.
Instead, today’s release throws the cat back among the pigeons and will create yet more uncertainty around when the Federal Reserve will move. I still expect a September hike, yet what is important is that not everyone does and that diverse range of opinions breeds further volatility in the markets.