- Unemployment Claims come out better than expected
- Lowest unemployment level in US since 1969
- Non-Farm Payroll due on Friday
The Employment picture for the United States continues to look very strong, as the Unemployment Claims figures came out on Thursday at 202,000, much lower than the 215,000 expected for the week. This shows that fewer unemployed people in the United States than anticipated, as this is a weekly gauge of those looking for unemployment benefits.
The United States is currently blessed with the lowest unemployment rate since 1969, something that would have seemed impossible just a few years ago. As a result, the US dollar continues to attract some flow longer term.
What the announcements indicate
The Unemployment Claims is an aggregate figure of those looking for insurance benefits on a weekly basis in the United States. It is used as a gauge of whether or not there are significant firings. As this indicator gets larger, it shows that there could be potential deterioration in the labor market. By extension, this has a massive effect on the US economy, as consumption is 70% of GDP.
The Non-Farm Payroll figures come out tomorrow, and they are widely followed by the trading community. This figure released on Thursday will be used cumulatively to suggest what the following month’s release will look like in the Non-Farm Payroll figures.
It should be noted that the Non-Farm Employment Change for the month of January is expected to show an addition of 161,000 jobs for the United States, while Average Hourly Earnings month-over-month is expected to gain 0.3% for the same month. Furthermore, the Unemployment Rate is expected to come out at 3.5%, unchanged from the previous announcement.
US economy very resilient
The main takeaway from these numbers is that the United States economy should remain very resilient, and therefore the US dollar should continue to strengthen. The US dollar has been very strong against the euro and the Australian dollar lately. It has even strengthened against the Japanese yen, as money is clearly flowing into the United States via the stock market.
The announcement on Friday will naturally have a significant effect on volatility and pricing of the US dollar. So, at 8:30am New York time, expect a lot of noisy trading.
However, if the numbers come out as expected, it’s likely that the US dollar will continue to strengthen over the longer term. That’s because GDP in several of the world’s economies remains well beneath the US growth rate.
Many of these markets are offering negative yields, something that is designed to keep money from flowing into the bond market and into the stock market of those countries. Going forward, it looks as if we should see more of the same, with the United States leading the way for the rest of the world.
- Serious questions on effect of China-US trade war and wildfires
- Employment Change much better than anticipated
- Unemployment Rate falls
The Australians released employment figures early on Thursday, Sydney time. These contribute to one of the most important variables when it comes to figuring out the strength or weakness of the economy.
There are a lot of questions as to whether or not the China-US trade war has inflicted serious pain on Australia, not to mention the wildfires that have been so destructive over the last several weeks. Ultimately, there are a lot of crosscurrents out there when it comes to the Australian economy, but clearly, employment will continue to attract a lot of attention.
The announcements came out strong
The announcements coming out at 12:30am GMT were very strong and caught the market off guard. The Employment Change figures were initially expected to be 12,200 jobs added in Australia for the month of December, but the announcement came out at a very surprising 28,900 job additions.
Furthermore, the Unemployment Rate fell from the 5.2% that was expected, reading 5.1% for the month. This was a pleasant surprise considering there are so many concerns over the effect of the China-US trade war slowing down demand for Australian commodities.
A huge part of the Australian economy is directly connected to exports to Asia, mostly in the form of Chinese construction and manufacturing. However, the recent global slowdown has had an effect on Australia itself. Remember, Australia has not seen a recession for decades, and that is something that causes a lot of angst.
With wildfires raging throughout Australia, there are also concerns about the destruction of businesses and/or employment. So far, that has certainly not shown itself to be the case, and the markets reacted almost at once.
The most obvious reaction was in the Australian dollar, as it gained 0.4% against the US dollar almost immediately.
Concerns still abound
After these announcements, it’s obvious that the markets will continue to walk on eggshells, as there are still concerns about the Chinese economy, especially following the ongoing virus outbreak.
The results from the employment sector should have people thinking less about an interest rate cut from the RBA. In general, this should be good for all things Australian, be it the currency or the equity markets. Some of the winners from the ASX 200 immediately following the releases revolved around consumer goods in Australia, as the stock market celebrated the good news.
Ultimately, things in Australia must be getting much better than originally thought, and this should be priced in when it comes to Aussie bonds, equities, and its currency. This should be good for global markets in general.