A few minutes ago, the US published its last Jobs Report ahead of a critical election next week. The US Jobs Report came in with positive news for President Obama, the Democratic Party and most importantly, the Democratic presidential candidate Hillary Clinton.
Definitions
- Non-Farm Employment Change: Change in the number of employed people during the previous month, excluding the farming industry. It is released monthly, usually on the first Friday after the month ends.
- Unemployment Rate: Percentage of the total workforce that is unemployed and actively seeking employment during the previous month.
- Average Hourly Earnings: Change in the price businesses pay for labor, excluding the farming industry.
Why This Is Important For Traders
- NFP: Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.
- Unemployment Rate: Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.
- Average Earnings: It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer.
Why This Is Important For Democrats
Well, the current US administration has made some progress over the past eight years. The unemployment rate was rising to very high levels, nearing 10%, but now the unemployment rate is at 4.9%. This represents good progress. Regardless of the quality of jobs and/or how the unemployment rate declined, the average American likes to hear good news. With today’s positive data, which we will explain later, this the average American is thinking that Democrats have done a tremendous job and that the Republicans crashed the economy during George W Bush’s terms. Therefore, today’s data might give Hillary Clinton another push next week.
Results
| Indicator |
Actual |
Forecast |
| Non-Farm Employment Change |
161K |
174K |
| Unemployment Rate |
4.9% |
5.0% |
| Average Hourly Earnings |
0.4% |
0.3% |
What Does It Mean?
Today’s data increases the possibility for a rate hike by the Federal Reserve in December. After the announcement, the Fed Fund Futures jumped to above a 70% chance for 25bps rate hike in December. In return, the US Dollar advanced across the board. However, this might not continue as the uncertainty toward the elections might keep traders away from the market, and they might rush into safe haven assets. Yet, some of the news was bad for other sectors such as the manufacturing sector which lost more than 9K jobs last month. Therefore, it is hard to predict which way the market will move.
What’s next?
In such situations, the best way to look at things is to wait and see, don’t risk the rational markets during high impact news. There is always an uncertain tomorrow. If you don’t feel confident, close your screen and enjoy your early weekend.
