US Jobs Disappoint, Risk of Sept Hike Recedes, Dollar Falls

The US grew 151k jobs last month and when coupled with the 20k upward revision to the July figure the net job creation is not far from the 170k-180k median expectation.  

However, the details were more disappointing.  Average hourly earnings rose 0.1%.  The 2.4% year-over-year increase compares with a revised 2.7% (from 2.6%) in July and is the weakest pace since March.  Average weekly hours fell to 34.3 from a revised 34.4 hours (initially 24.5 hours).  There are roughly 135 mln workers and the full-time equivalent of a tenth of hour swamp the headline increase in terms of output.  

The unemployment rate was unchanged at 4.9%.  There had been some hope it would slip to 4.8%.  The participation rate was unchanged at 62.8%.   

Separately, the US reported a smaller July trader deficit.  The $39.5 bln shortfall in July compares with a $44.7 bln deficit in June.  It is the smallest deficit in three months.  This is consistent with the shifting composition of growth in the current quarter.  Consumption may soften, but investment appears to be increasing.  Net exports may be less of a drag.  

The market’s initial reaction is to remove an meaningful chance of a September hike.  The dollar has come off across the board.  Not only are all the major currencies now higher against the dollar, but so are the emerging market currencies.  Gold and oil are also advancing on the back of the weaker dollar.    Although ahead of a long holiday weekend in the US, look for liquidity to dry up with the close of London.  Immediate potential extends toward $1.1275 and $1.3380 for the euro and sterling respectively.  The dollar fell to JPY102.80 but is showing some resilience as it tries to recapture JPY103.  

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