Mixed as NFP Misses Estimates but Unemployment Rate and Hourly Earnings Improve

US NFP AND JOBS REPORT KEY POINTS:

• The US Added 209,000 Jobs in June, Slightly Below the Forecasted Figure of 225,000. May Figure Revised Down to 306,000.
• The Unemployment Rate Fell Back to 3.6%.
• Average Hourly Earnings Came in at 0.4% MoM with the YoY Print Back up to 4.4%.
• To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.

The US added 209k jobs in June following a downwardly revised 306K in May, and below market forecasts of 225K. Nonfarm employment has grown by an average of 278,000 per month over the first 6 months of 2023, lower than the average of 399,000 per month in 2022. Employment continued to trend up in government, health care, social assistance, and construction per the U.S. Bureau of Labor Statistics data released today.

Customize and filter live economic data via our DailyFX economic calendar

The unemployment rate fell to 3.6% which is lower than May’s seven-month high of 3.7 percent and in line with market expectations. It is important to note the unemployment rate has ranged from 3.4% to 3.7% since March 2022, a sign of the tightness in labor markets in the US. The labor force participation rate was unchanged at 62.6 percent, remaining at its highest level since March 2020.

Looking more closely at the employment survey, average hourly earnings which remains a powerfulinflationgauge for the Fed, increased by 0.4% MoM up from 0.3% in May, bringing the annual rate back to 4.4% from 4.3% previously.

As we move forward into the rest of the US session it will be interesting to see whether the dollar and risk assets are able to sustain the initial move or are we in for more whipsaw price action. The chart below shows the NFP’s deviation from its forecast for the last 17 months, compared to the market reactions in FX pairs.

Source: FinancialJuice

FOMC MEETING IN JULY AND BEYOND

The US Federal Reserve continues to lean on the hawkish side despite the pause in June as evidenced by the hawkish rhetoric of policymakers as well as the FOMC June minutes. The minutes revealed that some members were in favor of a 25bps hike but agreed to a pause. The idea from the Fed is that a pause provides an opportunity to get a look at more data releases which have largely pointed to a strong economy despite a blip in US PMI data which seems to be a global trend at present.

In the aftermath of the ADP print and todays numbers the Feds ‘soft landing’ may not be as far off as people may think, particularly if inflation continues its downward trajectory. Average hourly earnings today however will not help the Inflation picture. Looking ahead to the July Fed meeting and a rate hike of 25bps is largely priced in with market now eyeing further hikes toward the end of the year as the Fed is likely to remain aggressive in order to tame inflation.

MARKET REACTION

Dollar Index (DXY) Daily Chart

Source: TradingView, prepared by Zain Vawda

Initial reaction on the DXY saw the dollar lose ground and dip below the 50 and 100-day MAs before a slight pullback. Will todays move be sustainable? Looking at the bigger picture and the DXY continues to struggle to hold onto gains with further downside over the medium term looking more and more likely. There is chance of another bullish run ahead of continued downside though as technical are looking interesting with early signs of a golden cross pattern forming and may be worth monitoring. This lack of follow through following data releases has become a theme for the DXY of late as FX majors by and large remain confined to tight ranges.

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda