the Nonfarm Payroll report today was not all positive. The Unemployment Rate came in at 7.6%, which missed analysts’ expectation by 0.1%, or a major disappointment as Fed’s threshold targets for policy change were 6.5% Unemployment Rate and 2.5% CPI target within 6 month… Needless to say, a stubbornly high unemployment rate is not going to fly with the Feds, so unless we see unemployment rate continues to drop, it’s highly unlikely for Bernanke to keep his tapering schedule. Furthermore, upon closer look into the Unemployment Rate figure, we see two troubling signs that could threaten tha tapering plan: the Underemployment Rate (14.3% v 13.8% prior) and Civilian Labor Force Participation Rate (63.5% v 63.4%). The Underemployment rate means more people are taking part-time or underpaid jobs, and the Participation rate means that there are more people in the labor force, which is now at 155.8M v 155.7M prior month, or roughly 100K more people were added to the total labor force, which effectively dilutes the increase in the Nonfarm Payroll jobs as now it will take more jobs to drive down the overall Unemployment Rate… At any rate, I’m still bullish on the USD, but I won’t bet the farm on Bernanke to keep the September bond purchase tapering timeline, as the Unemployment Rate could increase due to seasonal factors; but for the rest of the month, I believe USD could continue to gain against other majors, specifically the EUR and GBP after Thursday’ surprises from both ECB and BOE.
Posted on: Sun, 07 Jul 2013 16:17:24 +0000
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