U.S. Dollar priced in on strong Non-Farm Payroll for December

U.S. and Canadian December payroll figures continue to beat expectations. Looking at the U.S. figures especially, this is a good sign signalling we are one step closer to the much anticipated rate hike.

Summary of events:

  • 10.7k increase in Canadian employment change
  • Canadian unemployment rate drops to 6.8%
  • U.S. non-farm payroll change added 178k just barely beating expectations
  • U.S. unemployment rate drops to 4.6% beating the 4.9% expectation

Two concerning figures in regards to the employment conditions in the United States.

screenshot-at-dec-03-21-25-54_us-labor-part-rate

The U.S. Labor Force Participation Rate has been consistently dropping for the past three months. This, of course, will skew the the unemployment rate reported making it seem more optimistic than reality.

screenshot-at-dec-03-21-27-01_us-average-hourly-earnings

This second chart shows a drop in November’s hourly earnings figure. The losses come from the utilities (-72 cents), mining and logging (-46 cents), durable goods (-20 cents), and construction (-10 cents). We can expect these sectors to slowly recover as commodity prices pick up.

If these two indications are neglected, last week’s strong payroll figures just raises the likeliness for a rate hike.

Markets are experiencing heavily unwanted volatility due to the Italian referendum on open. Currently, no trade setups until market volatility normalizes.

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