The reaction to today’s payroll data gives great insight into current market conditions as the absence of liquidity and transaction volumes sees momentum last minutes instead of hours. Payrolls saw a quick burst of activity, with the 223,000 jobs added, missing consensus but still growing at a fairly sustainable level. The dubious results from the Bureau of Labor Statistics regarding nonfarm payrolls were negatively impacted by the less manipulated average hourly earnings statistics and labor force participation data. Both of the latter data points hearken to the point that the labor recovery in the United States is not a recovery for most employees. Wages are not growing for the bottom 80% of Americans while the managerial class and top 20% enjoy the gains driven by quantitative easing policies. Labor force participation meanwhile hit the lowest rate since October of 1977, falling from 62.90% to 62.60% in June with a record 93.6 million individuals outside the labor force. This is not a reassuring sign for the American economy as more eligible workers transition from employment to social welfare.
The more notable point of today’s payroll number was the lacking market reaction, evidenced by the briefly volatile response as risk-assets squeezed higher before quickly reversing and retreating. Market momentum has of late been slow and steady, with news that would normally drive EUR/USD 100-150 pips instead showing a modest 75 pip intraday swing before retracing over half the move. The short-interest in the euro and pound saw a squeeze higher on the announcement in what appears to be a classic shakeout move with EUR/SD and GBP/USD quickly retreating from upticks just 15 minutes after the announcement. These are further signs that liquidity has dried up and that markets are transitioning back towards a “bad news, is good news” phase. Although today’s announcement might have dented dollar momentum higher, expect the chaos emanating from Greece and China to be the driver of softness in risk-assets as markets remain uneasy.