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Strong US Labor Data Overshadowed by Coronavirus Fears

Matt Eidinger February 6, 2020

A slightly better than expected weekly reading on the US labor market is having a muted effect on the US dollar this morning, with coronavirus fears retaining a tight grip on global risk sentiment.

The trade-weighted dollar has risen almost 1% since Monday – rising to its highest levels since November, as investors seek safety amid a spreading pandemic. The illness has infected over 28,000 people worldwide and killed nearly 600 – and, although the rate of new cases appears to be slowing – looks likely to take a toll on the global economy.

The Department of Labor’s report showed weekly claims for unemployment benefits falling to 202,000 in the week ending February 1 – the lowest weekly print since mid-April last year. No states had increases of more than 1000 new filings last week. The sharp decrease in weekly filings was due to fewer layoffs in agriculture, forestry and manufacturing in California (-19,262), Illinois (-5,045) and Georgia (-2,904).

The less-volatile four-week moving average fell to 211,750.

Continuing jobless claims for the week ending January 25 registered a notable increase – jumping to 1,751,000.

Today’s data marks the second positive print for Uncle Sam’s labor market this week. Yesterday, Automatic Data Processing (ADP) released its first National Employment Report of 2020 – which indicated total private sector payrolls rose 291,000 in January – crushing market estimates that had been set closer to 160,000. Gains were weighted towards service-providing enterprises, which accounted for more than 80% of jobs created, while goods-producing firms underperformed – providing more evidence of near-recessionary conditions in the manufacturing sector.

However, this data will likely be forgotten by this time tomorrow morning, with currency markets shifting focus toward a Labor Force Survey from Statistics Canada and the all-important January non-farm payrolls report. In the past, strong ADP and jobless claims numbers have increased the potential for upside surprises when the payrolls are released – meaning that a US labor market hat trick is quite possible.

Matthew Eidinger
Fintech Specialist, Dealing Operations