Dollar drops as US hiring plummets. But NFP may not be as bad as it first looks

There was always going to be some noise surrounding this report given the US government shutdown. The headline figure was eye-catchingly bad, there was also a lot to like.

• 20K jobs created vs. 180k expected

• Unemployment -0.2% to 3.8% vs. 3.9% expected

• Wages 3.4% yoy vs. 3.3% expected

• Dec. revised higher from 220k to 227k

• Jan. revised higher from 304k to 306k


  • Dollar & sold off in a knee jerk reaction, Dow futures & S&P futures extended losses.

• EUR/USD + 0.3 % at $1.1230,

• Dow futures down 200 points at 25273 

• S&P futures -0.7% at 2729

  • Risk off dominated heading into the NFP report on global growth concerns. The ECB’s dismal outlook for the eurozone, combined with weak data from China overnight fuelled fears over the outlook for the global economy.
  • The headline US jobs figures was much worse than forecast, heightening concerns over the health of the US economy whilst sending the dollar and US equities tumbling lower.
  • December’s headline figure and January’s, which were both already high were revised upwards. Despite February’s odd number the average across three months is 184K, which is approximately what would be expected around this stage of the economic cycle.  Let’s be honest, after two outstanding months a payback month is not so unreasonable.
  • A bright spot in the report was the wage increase. 3.4% is the highest level of wages increase since April 2009. This, along with the falling rate of unemployment indicates that the US labour market is tightening. Wages are increasing which will increase inflationary pressures.  

Dollar still a buy?


  • There was always going to be some noise surrounding this report given the US government shutdown. The headline figure was eye-catchingly bad, which resulted in a strong knee jerk reaction from the markets. However, there was also a lot to like, such as wage growth, unemployment rate and upward revisions of previous months. Importantly, the three-month average is still where we would expect it to be.
  • The dollar is the best of a bad bunch right now. The ECB turned decidedly dovish, China downgraded its growth outlook, the pound is overwhelmed by Brexit uncertainty. The list goes on, the BoC removed its hawkish bias, the BoJ and RBA also have tilted towards the dovish end of the spectrum.
  • Whilst the Fed are pausing on hikes, as this report shows inflationary pressures are increasing in the US economy. This puts the dollar ahead of its rivals.

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