US Dollar Sideways as January Jobs Report Paints Mixed Picture

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Talking Points:

– Headline jobs growth comes in at +304K, and wage growth came in +3.2% y/y.

– The unemployment rate (U3) rose to 4.0% from 3.9%, but it came alongside a healthy expansion of the labor force participation rate from 63.2% to 63.1%.

– The US Dollar gained ground immediately following the data, but amid concerns that the US government shutdown hurt Q1’19 growth, traders were ambivalent about taking the jobs report too seriously.

See Q1’19 forecasts for the US Dollar, Euro, British Pound and more with the DailyFX Trading Guides

The first jobs report for 2019 is out and traders are proving ambivalent about taking the data too seriously. The January US Nonfarm Payrolls report showed headline jobs growth of +304K, easily blowing past the consensus estimate of +165K, according to a Bloomberg News survey.

At first glance, the rise in the unemployment rate (U3) to 4.0% may be seen as a negative, but it came alongside a healthy expansion of the labor market, with the labor force participation rate rising to 63.2% from 63.1%. In effect, the rise in the unemployment rate can be explained by the fact that there were more new entrants coming into the labor pool than there were available jobs.

While the topline beat was welcome against the backdrop of uncertainty thanks to the US government shutdown, it is worth noting that the December payrolls figure was revised lower by -90K jobs – effectively negating any positivity. Following the January FOMC meeting in which Fed Chair Jerome Powell dictated “patience” above all else, as well as the weekly jobless claims report that showed a spike in applicants, traders are clearly not buying into the idea that ‘all is clear’ for the US economy.

Elsewhere, wage growth remains strong, meeting expectations at +3.2% (y/y). This reading is tied with October and December 2018 as the fastest pace of wage growth seen since April 2009.

Here are the data driving the greenback this morning:

– USD Unemployment Rate (JAN): 4.0% versus 3.9% expected, unch.

– USD Change in Nonfarm Payrolls (JAN): +304K versus +165K expected, from +222K (revised lower from +304K).

– USD Labor Force Participation Rate (JAN): 63.1% from 62.9%.

– USD Average Hourly Earnings (JAN): +3.2% as expected, unch (y/y).

See the DailyFX economic calendar for Friday, January 4, 2019

DXY Index Price Chart: 1-minute Timeframe (February 1, 2019 Intraday)

US Dollar Sideways as January Jobs Report Paints Mixed Picture

Immediately following the data, the US Dollar whipped back and forth versus the Euro and the Japanese Yen, with the Dollar Index (DXY) rallying from 95.49 to as high as 95.59 in the wake of the report. By the time this report was written, the US Dollar had seen the DXY Index dip as low as 95.40 before settling in at 95.49 – its price before the jobs data were released – at the time this report was written,

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