Mixed as NFP Misses Estimates but Unemployment Rate and Hourly Earnings Improve

Key points of the US jobs and jobs report:

• The US added 209,000 jobs in June, just below the expected figure of 225,000. The figure has been revised to 306,000.
• The unemployment rate fell to 3.6%.
• Average hourly earnings came in at 0.4% MoM with print runs returning yoy to 4.4%.
• Learn more about price actionAnd chart patterns And Moving averagescheck the Education section of DailyFX.

The US added 209K jobs in June after a downward revision of 306K in May, below market expectations of 225K. Nonfarm employment grew by an average of 278,000 per month over the first six months of 2023, down from the average of 399,000 per month in 2022. Employment continued to trend upwards in government, health care, social assistance, and construction, according to US Bureau of Data Labor statistics released today.

Customize and filter live economic data via DailyFX Economic calendar

The unemployment rate fell to 3.6% which is below May’s seven-month high of 3.7% and in line with market expectations. It is important to note that the unemployment rate has ranged from 3.4% to 3.7% since March 2022, indicating tight labor markets in the United States. The labor force participation rate was unchanged at 62.6%, remaining at its highest level since March 2020.

Looking closely at the Employment Survey, average hourly earnings, which remains a strong measure of inflation for the Fed, rose 0.4% month-on-month from 0.3% in May, bringing the annualized rate back to 4.4% from 4.3% previously.

As we move into the rest of the US session, it will be interesting to see if the greenback and risk assets can sustain the initial move or if we are on course for more volatile price action. The chart below shows the deviation of the NFP from its forecast for the past 17 months, compared to the market reaction in the forex pairs.

Source: FinancialJuice

FOMC meeting in July and beyond

The US Federal Reserve continues to lean on the hawkish side despite the pause in June as evidenced by the hawkish rhetoric from policy makers as well as the June FOMC meeting minutes. The minutes revealed that some members were in favor of a 25 basis point hike but agreed to stop. The idea from the Fed is that the pause provides an opportunity to look at more data releases that have largely indicated a strong economy although there is a blip in the US PMI data which seems to be a global trend at the moment.

On the heels of the ADP’s print and today’s numbers, a Fed “soft landing” may not be as far off as people think, especially if inflation continues on its downward trajectory. However, today’s average hourly earnings won’t help the inflation picture. Looking at the Fed meeting in July, a 25bp rate hike is highly appreciated as the market is now eyeing further year-end hikes as the Fed is likely to remain aggressive in order to tame inflation.

Market reaction

dollar index (DXY) daily chart

Source: TradingView, prepared by Zain Fouda

The initial reaction on the DXY saw the dollar lose ground and drop below the 50 and 100 day moving averages before a slight pullback. Will the move today be sustainable? Looking at the bigger picture, DXY continues to struggle to hold on to gains with a further decline over the medium term looking more likely. There is a chance for another bullish path before the downtrend continues although the technical side looks interesting with early signs of forming a golden cross pattern and it might be worth watching. This lack of follow through with subsequent data releases has become a theme for the DXY recently, as the majors remain largely locked in tight ranges.

— Written by Zain Fouda L DailyFX.com

Connect with Zain and follow her on Twitter: @employee