Mixed US employment report, dollar erases initial losses
The latest headline US employment report was weaker than expected with non-farm payrolls increasing 98,000 for March compared with expectations of a gain close to 180,000 for the month.
This was the lowest headline increase since the shock report released in June 2016 and there was also a small downward revision to the February employment increase to 219,000 from 235,000.
Manufacturing jobs increased during the month, but there was a sharp decline in retail jobs for the second successive month which raised doubts surrounding consumer spending trends, although is more likely related to structural issues.
In contrast, to the payrolls data, the unemployment rate fell to 4.5% from 4.7% and compared with expectations of the rate being unchanged at 4.7%. This data is derived from a separate household survey which reported an increase of over 450,000 people who described themselves as employed. This was the lowest unemployment rate for 10 years.
The average earnings data was in line with expectations with a monthly increase of 0.2% to give an annual rate of 2.7% and does not suggest major upward pressure on earnings.
After initially focussing on the payrolls data, markets subsequently paid greater attention to the unemployment data which indicated that more people were able to find jobs.
There should not be a major impact on short-term expectations surrounding Federal Reserve policies with a further rate increase in June the most likely outcome.
The dollar initially weakened against major currencies with USD/JPY sliding to near 110.20, but the US currency gradually regain support and eventually ended with net gains on the day as USD/JPY touched 111.00. GBP/USD dipped below 1.2400 and EUR/USD retreated to 4-week lows around 1.0600.
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