US payrolls fall short of forecast

Publication date: 9 July 2012
Author: Mark Deans, Moneycorp

The Western media are traditionally indifferent to the human rights violations that take place as a matter of course in North Korea. They were up in arms, however, about a concert attended by Kim Jong-un on Friday, held to mark the centenary of his grandfather, Kim I-sung. Their outrage was sparked by the appearance on stage of Mickey Mouse, Dumbo and other assorted cartoon characters, in a monstrous breach of copyright legislation. The idea of putting an autocrat in front of a bunch of Disney characters was apparently inspired by Wednesday’s Treasury Select Committee hearing.

The committee meets again this afternoon to interview Bank of England Deputy Governor Paul Tucker. With a bit of luck its members will have learnt from their errors last week and will not ask Mr Tucker 13 times whether he has stopped beating his wife. As was the case with the committee’s previous outing, there are no economic data on the agenda to interfere with investors’ enjoyment of the spectacle.

It would have been a different matter had the interrogation taken place on Friday afternoon. Investors would have had little alternative but to focus on the US Employment report and the world’s most important monthly statistic: the change in US non-farm payrolls. Analysts had predicted an increase of between 90k and 100k. The actual number turned out to be 80k and investors felt obliged to be disappointed.

In the case of almost any other currency that disappointment would have translated into selling pressure. Indeed, the US dollar did indeed fall by half a yen, but just about everywhere else it moved ahead. (Weak payrolls number = weak US recovery = weak global economy = investor nervousness = demand for safe-haven currencies.)

By close of play the euro was down by one US cent and one yen. Sterling was lower too, but only by a third of a US cent and half a yen. It is up by half a euro cent from Friday’s opening level. The commodity dollars all took a knock from the US payrolls number. Against sterling the Canadian dollar is quarter of a cent lower, the Aussie is down by three quarters of a cent and the Kiwi has lost more than a cent.

Today’s statistics rank well below non-farm payrolls in their importance. Japanese machinery orders fell by -14.8% in May and are up by just 1% on the year. Chinese inflation slowed to 2.2% in June. Swiss unemployment remained steady at 2.7% and Germany’s monthly trade surplus narrowed slightly to €15bn. Yet to come are Greek inflation and the Sentix index of Euroland investor confidence. Tonight brings New Zealand business confidence, Australian business confidence, the RICS UK housing price balance and China’s trade surplus.

On Friday almost nothing happened until the US employment report got things going. No item on today’s agenda has anything like the same potential so it could be a quiet one. Don’t forget to watch the deputy governor on TV at half past four (London time).