The US dollar is weaker on the very disappointing gain in US non-farm jobs: only 120K. The small drop in the unemployment rate to 8.2% is “blamed” for the drop in the participation rate.
But not all is bad in the US jobs report. Here’s why it could be only a temporary pause.
- Participation: Let’s start with the drop in the participation rate: it dropped from 63.9% in March to 63.8% in February. It was at 63.7% in January. Those are seasonally adjusted numbers. Well, warm weather in cold months can always be “blamed” for better seasonally adjusted numbers. Right? Not this time: the not-seasonally adjusted number remained unchanged between February and March, at 63.6%. See more official data here.
- Not-seasonally adjusted unemployment rate drops: This is a bigger drop, from 8.7% to 8.4%. Yet again, the doubts about warm weather skewing the data are in doubt. Also, let’s remember that the headline number did fall from 8.3% to 8.2%.
- Real unemployment rate drops: U-6 is a figure that counts the “total unemployed”. It dropped from 14.9% to 14.5% (adjusted) or from 15.6% to 14.8% not-adjusted. This wider figure undermines the doubts in the drop of the regular unemployment rate, which depend on the participation rate. This is the full official definition: Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force
- Number of Involuntary Part-time Workers Fall : These are people who work part time because their hours were cut or they weren’t able to find a full time job. In times of weak recovery, the number of such part time workers rise, without a rise in full time jobs. This time, the figure fell from 8.119 million to 7.672 million. Quite a fall. This is seasonally adjusted. The not-seasonally adjusted number dropped from 8.455 million to 7.867 million.
- Revisions: Recent history has usually shown upside revisions. While this time it was very marginal: only +4K, it exceeded 60K last month. Upside revisions were seen more than downside ones. Note that the ADP report for the private sector showed a gain of 209K jobs in March, much higher than +121K than the official report for the private sector. There’s always a chance that ADP will be revised to the downside, or that the reports will remain far apart. Yet again, there’s a good chance of an upwards revision of today’s poor data.
What do you think? Is today’s disappointment the beginning of a downturn, or a one time event?
The dollar weakened following the release, but the losses were limited, especially against the euro. For more on EUR/USD, see the euro to dollar forecast.
Further reading: Fed Doves Could Easily Return to Rule the Roost – They certainly have their chance now…