Looking at the Non-Farm Payroll numbers released last week, it is obvious that there was a little something for everyone in the numbers. Before the release, the average expectation was for a gain of 100,000 jobs in July, and with the BLS announcing 165,000 jobs added, this of course was received well. However, the unemployment rate actually ticked up to 8.3%, which often is attributed to more potential workers reentering the marketplace for a job.
This is mainly because of the way the overly complicated announcement is put together. Much of the announcement is actually based upon assumptions. Most of these assumptions are revised lower later on, and as a result the numbers can only be trusted as a general barometer of job expansion.
With Friday’s release, the markets weren’t as focused on the raw numbers as it was the Federal Reserve’s likely reaction. With the Fed fairly tight-lipped about its monetary policy lately, the markets are trying to disseminate whether or not the central bank will pursue further easing. This was the biggest problem with the number: It wasn’t decisive enough for clarity.
For example, if the jobs number came out at 50,000 added, then the Federal Reserve would have been “painted into a corner” as recent comments by Ben Bernanke have suggested that they are certainly watching the employment numbers for direction. On the other hand, if there was a larger number like the one we got – it could have the Federal Reserve waiting further to ease. Either way, the prospect of monetary easing is returning less and less over time, and there has to be a conversation going on in the Federal Reserve as to the best way to go about it if it is indeed needed.
However, with the unemployment rate rising one tenth to 8.3%, there are many in the marketplace that believe the Fed will be involved in some form of easing after the September meeting. Essentially, this jobs number has thrown the ball back in the air again, and has raised the stakes for the next Non-Farm number. With this being said, the market will continue to be choppy and headline/rumor driven.
With the drama still going on in Europe, the hope for some kind of clarity in America has essentially disappointed the markets as they thought at least one side of the EUR/USD equation would have been clear. With this being said, there is going to be a lot of headline risk going forward, and the Forex markets will continue to be a short-term affair.