US Jobs Details Better than the Headline

The US created a net new 156k jobs in December, which was slightly disappointing.  The average work week slipped unexpectedly.  However, most the rest of the jobs report was constructive.  

The 17k upward revision to October and November series offset the headline miss.  Manufacturing add 17k jobs.  This is the most since January.  On average the US lost 4k manufacturing jobs a month in 2016, after gaining 2k manufacturing jobs a month in 2015.  

Although the underemployment rate eased to 9.2%, an new cyclical low, the more watched U-3 measure rose to 4.7% as expected, from 4.6%.  The participation rate ticked up to 62.7% from a revised 62.6% (initially 62.7%).  

Before the report, we suggested that hourly earnings may be the most important component.  It rose 0.4% for new cyclical high year-over-year pace of 2.9% (which is the fastest pace since 2009).     Looking ahead to January, there is risk that earnings growth slows.  Last January average hourly earnings rose 0.5%, which is the second highest since the financial crisis.  Minimum wage was lifted at the start of the year in 19 states, but the impact on the national figures will likely be negligible.  

Canada’s jobs report was stronger.  It created 81.3k full-time jobs.  In proportionate terms, this is as if the US created 800k jobs.  The participation rate rose to 65.8% from 65.6%.  The unemployment rate ticked up to 6.9% from 6.8%.  

Canada also surprised by reporting a November trade surplus of CAD0.5 3 bln.  Economists had expect that the deficit grew to CAD1.6 bln from CAD1.0 bln.   The US trade deficit was in line with expectations at $45.2 bln.  

 The dollar and US yields are recouping more of yesterday’s decline.   A break of $1.0480-$1.05 would suggest the euro’s upside bounce is exhausted.  A dollar move above JPY116.80-JPY117.25 would also hint that the greenback was going to make an other run toward JPY118.30-JPY118.60.  Sterling support is seen in the $1.2285-$1.2310 area.  The Canadian dollar is struggle to sustain it upward momentum.  A US dollar back above CAD1.3250 would solidify the low near CAD1.32.00.


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