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Dramatic December Jobs Data Boost Greenback

Don Curren January 4, 2019

The US dollar gained ground Friday morning after domestic jobs data indicated that country’s economy recorded robust job creation in December despite the softening evident in some other recent economic data.

The DXY US dollar index advanced about 0.3% after the release of the stronger-than-expected jobs report.

The Bureau of Labor Statistics said the US economy created 312,000 new jobs in December, while the unemployment rate rose to 3.9% from a 49-year low of 3.7%, largely because more people entered the workforce in search of jobs. Economists had expected new job creation of about 184,000 in December, and anticipated a jobless rate of 3.7%.

While a positive sign for the US economy and mildly supportive for the greenback, the jobs result might not have a significant, sustained impact on the market’s view the US Federal Reserve may not raise interest rates as quickly or consistently as earlier expected.

Economists could tend to focus on more recent and more forward-looking data such as the ISM manufacturing data for December released Thursday, which showed the ISM’s monthly index for the sector dropping 5.2 points to 54.1 in December, a two-year low and well below consensus.

The December US payroll data contained revisions in the two preceding months totaling 58,000 and indicated that total employment gains last year to a three-year high of 2.64 million.

The average wage paid to American workers rose 11 cents, or 0.4%, to $27.48 an hour, bringing the 12-month rate of hourly wage gains to 3.2% from 3.1%.

North of the border, Statistics Canada reported that employment grew by about 9,300 in December while the unemployment rate was unchanged at 5.6%.

In the 12 months to December, employment increased by 163,000 (+0.9%), entirely driven by gains in full-time work (+185,000 or +1.2%). Over the same period, total hours worked rose 0.9, StatsCan said.

Economists had forecast job gains of 6,800 and an unemployment rate of 5.7% in December.

The Canadian dollar saw choppy trading in the aftermath of the two jobs reports, but by the time had settled its was little changed, hanging on to the approximately 0.5% gain it made against the greenback in overnight trading.

BOTTOM LINE:  December’s dramatic job gains in the US provided a boost to the greenback Friday morning, but are unlikely to wash away completely fears of significant economic slowing or reverse the market’s shift to the view the Fed may decelerate the pace of its monetary tightening in the US. Similarly, in Canada decent job gains in the last month of 2018 are unlikely to undermine the view the Bank of Canada is also likely to soften its stance on future monetary policy.

Don Curren
Content Editor and Market Strategist

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