Last Friday forex traders received the non-farm payrolls reports or NFP report for November and the US Dollar launched a strong rally after the report. The NFP report showed that 321,000 jobs were added in November. This was far above expectations where the consensus called for the addition of 230,000 jobs. The unemployment rate remained unchanged at 5.8%. Average hourly earnings increased 2.1% year-over-year and the average hourly workweek rose to 34.6.
While the headline figure was a positive surprise most of the data released does raise questions. For example the ADP report showed a gain in private sector jobs of 208,000 while the NFP report showed an increase of 314,000. Continuing claims surged towards the end of November, but this is not reflected in last Friday’s NFP report. The unemployment rate remained unchanged despite the gain of 321,000 jobs, but has always decreased with addition of around 200,000 jobs. According to the NFP report more Americans are employed, but the labor force participation rate remains unchanged at 62.8%.
The NFP report has us believe that the US labor market is in a strong recovery, but the American consumer has not responded. Consumer spending data as well as retail sales have been muted. The US Federal Reserve has just recently ended its economic stimulus, but the financial system remains vulnerable to shocks. This raises the question if the NFP data can be trusted when consumer on the streets are telling a different story.
Business spending is also depressed so where are those jobs being created? Durable goods orders are weak and after last Friday’s NFP report the US also reported its factory orders for October which unexpectedly contracted by 0.7%. In addition the gain for September was revised down to 0.5% and the two week combined data shows a contraction of 0.2%. Has the US government started to print false reports in order to create a wrong sense of positive momentum?
Forex traders need to decide for themselves if they continue to trust the employment propaganda of the US government, but if the data would be correct than other economic reports should reflect the positive effects of a strong labor market. The headline figure showed an increase of 321,000 jobs, but the household employment change showed an addition of only 4,000. This 4,000 may be much closer to economic reality in the US than the 321,000 and the US Dollar will have to face economic reality at some point.