NFP severely disappoints dollar and equities plunge gold surges

Key US employment data in the form of non-farm payrolls and the US unemployment rate were released on Friday morning. As for the main number, 142,000 jobs were added in September against previous consensus expectations of 201,000 jobs added. The fact that this data point missed expectations by such a substantial margin could put a damper on the Fed’s previously telegraphed aims to raise interest rates before the end of the year.

To add to this disappointment, August’s non-farm payrolls number was revised down to 136,000 added jobs from the 173,000 figure reported last month. The unemployment rate for September held steady at 5.1%, as expected. September’s average hourly earnings also fell below consensus, as it came out flat against expectations for a 0.2% increase. Very importantly, the labor force participation rate in September fell to 62.4%, its lowest reading since 1977.

Overall, most of the employment data points that were released Friday morning severely disappointed, leading the market once again to doubt the prospects of a 2015 Fed rate hike.

The immediate effect on the global markets after release of this data was strong and sweeping. The major US stock indices, including the S&P 500 and Dow, were down by over 1% shortly after the markets opened. The FTSE and DAX also dropped sharply after the release. As would be expected, the US dollar fell broadly against most other major currencies, most notably the euro and yen, while gold surged sharply, paring much of the precious metal’s losses over the past week.

With this surprise disappointment in the US employment situation and its potential rate hike ramifications, the greenback could begin a period of retreat and gold should continue its attempts at recovering from its lows. Further, with indications of uncertainty in the US economy to add onto concerns about the global economy, equities should continue to be pressured as market volatility may well be here to stay.