The very closely watched US jobs data was released on Friday and came in above analysts’ expectations. Many pundits had expected the US economy to create 125000 jobs in October, but according to the US Labor Department, the figure came in at 204000 new jobs.
Despite this the (how shall we put this?) actively unemployed figure actually rose from 7.2% to 7.3%. In order to be considered as unemployed, it no longer suffices to be without work, but you need to be actively seeking other positions. The figure may have risen since some of the Federal workers “furloughed” during the partial shutdown of the government during November may have registered as unemployed. Figures for employment in August and September were also revised upwards by 60000 jobs.
The initial reaction to the better US jobs news on the Forex markets saw the Dollar rise strongly against the Yen, but the quickly reversed with the Dollar closing strongly down against the Yen. However, this position has now flip-flopped with the Dollar at levels not seen since September (currently, the Dollar is worth 99.65 Yen). The relative weakness of the Yen has bolstered the Nikkei which closed 2.2% higher, mainly because of the weaker Yen.
The US Q3 figure came in at a stronger level than many had suggested, with annualised growth at 2.8%. Perversely, this better news is causing jitters amongst investors since they believe that the Federal Reserve may start to turn off the tap and reducing the money injected into asset purchases each month. A proportion of this increased liquidity has gone into emerging markets. Consequently, these markets are vulnerable to a tightening of US monetary policy. When the Fed finally acts, the Dollar will weaken, but Forward Guidance has it that this will not be in the immediate future since it is conditional on a fall in unemployment to below the 6.5% level. Given that the increase in US consumer spending has eased, the unemployment goalposts may remain just where they are, for the time being.