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Soft Jobs Report Trumps Taper, Pressures Dollar

Published 08/02/2013, 09:07 AM
Updated 07/09/2023, 06:31 AM
The US employment report is disappointing. Fewer people are working a shorter work week and for lower pay.

Look To The Margins
The Fed's tapering decision does not rest on a single print, especially of high frequency and noisy data, but on the margins, between the FOMC statement that gave no hint of a move in September, a manufacturing PMI that showed prices falling and now a soft employment report, look for some soul searching by those who thought and acted as if reducing long term asset purchases next month was a done deal.

Nonfarm payrolls rose by 162k and the back two months were revised lower by a total of 26k. Hourly earnings fell 0.1%. The market had expected a 0.2% increase. The year-over-year rate slipped back below 2%. The work week fell by 0.1 hours, which is tantamount to the loss of output of several hundred thousand workers.

Once Again, It's The Participation Rate
The fact that the unemployment rate fell to 7.4% from 7.6% says more about the participation rate than the rate of employment. The participation rate fell to 63.4% from 63.5%. It dovetails nicely with our idea that when the Fed does taper, it lowers the unemployment threshold (not trigger) for higher rates to 6.0% from 6.5% presently. That said, the broader measure of unemployment--U-6 fell to 14% from 14.3%.

The dollar fell across the board on the disappointment and Treasuries rallied, with the 10-year pulling back from testing last month's cyclical high near 2.75%.

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