Poor Jobs Data Pressures Dollar, Unsourced ECB Comment Brings it Back

Little good can be said
about the August jobs report.
  The 156k growth in jobs disappointed and is well below
the recent averages. The back two months were revised lower for a total of 41k
jobs.   The unemployment rate ticked up to 4.4% even though the
participation rates were unchanged at
As if that was not
sufficiently disappointing, the work week slipped a to 34.4 hours from 34.5
hours and average hourly earnings did not rise as much as expected (0.1%
instead of 0.2%).
  One of the few bright spots was
manufacturing, which added 36k jobs.  This
is the most since August 2013.  The July manufacturing
payrolls were revised to 26k from
The market has responded as
one would imagine.
dollar was sold, and Treasuries bought.
 That is what markets do, but for policymakers,
it is a different story.  The employment data is important, but it is noisy,
and the broader indications are of a labor market has fared better than the Fed
had expected at the end of last year.    This year’s average jobs
growth slipped to 176k from 184k.  It averaged 187k last year.
The Fed has tried to position it balance sheet
operations as, once they start, being on the almost
automatic pilot, not subject to the vagaries of high frequency data. 
means that expectations for the Fed to announce
that it will begin allowing its balance sheet to shrink starting in Q4 should
not be impacted by today’s employment report.  

The dollar’s sell-off in
responses to the data was reversed in
response to reports that suggested that the ECB may not decide on its balance sheet until December. 
 Many had expected an announcement
next week, though some thought October.  We had seen a September
announcement as the most likely venue given the desire to 1) prepare the market
and 2) have new staff forecasts in hand.  We had thought that a dovish
tapering could be signaled by a cut in
next year’s CPI forecast.  We thought halving
the purchases to 30 bln would maximize the ECB’s flexibility to end the program
in the middle of next year.  

That said the ECB report was based on unnamed sources, and these kind of unsourced statements are how the doves and
hawks jockey for position at the ECB. 
Many will read this as a sign that the ECB
is uncomfortable with the euro above $1.20, which it had appeared to be headed for after the US employment
data.  We also caution about false flags
or leaks that appear to come from one side
but are really mean to embarrass or deliver
a fait accompli.  


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