The Nonfarm Payroll data for February was much better than expected, coming in with 273,000 jobs created vs a revised January number to 273,000 (from 225,000) as well. In addition, the unemployment rate declined to 3.5% in February from 3.6% in January. Average hourly earnings were as expected at 0.3% while average weekly hours worked upticked slightly to 34.4.
Although jobs data has been 250,000+ for 3 of the last 4 months, it will most likely mean little to the Fed at the FOMC meeting on March 18. As long as the jobs market is holding up well, the main focus for the Fed will be containing the economic fallout from the coronavirus. Employment data going forward will be key. What will the employment data look like in Q2? Will airlines have to lay off employees because people are traveling less? Many companies have already halted international travel because of the coronavirus. Can cruise lines survive with less people booking trips? Will postal workers and delivery people need to be laid off because they may have to halt service due to mail and boxes being contaminated? These are all issues that will be watched over the course of the next quarter in the employment data. The Fed is aware that cutting rates will not stop people from getting the coronavirus. However, cutting rates, along with fiscal stimulus, will help service and travel companies survive the downtick in the global economy.
Markets were mostly unchanged on the release of the NFP data. Traders know that employment is not the main issue at the moment. Despite the much better data, the DXY traded within a 15-pip range after the release.
NFP Better Than Expected – Little Impact
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