Strong North American Jobs Data Sends Both Dollars Higher

The US and Canada reported much stronger than expected employment data and this is lifting the respective currencies. The data stands in contrast not only to expectations, but also the poor news stream emanating from Europe.

The US created a net 146k jobs in November, well above the 85k consensus forecast. The BLS said the storm not substantively impact this time series. The fact that the Oct estimate was cut by 33k jobs to 138k was taken in stride. The revision in the Oct figures was due to a 51k decline in government jobs.

The effect of the storm may be evident in the 20k loss of construction jobs. The household survey, which is used to calculated the unemployment rate did report a decline in the participation rate, which is why the unemployment rate fell to 7.7% from 7.9%, the lowest since Dec 2008. In addition, the BLS calculated that 369k people were not at work during the survey week (which was a week earlier due to the Thanksgiving holiday). This compares with 70k average of people not working due to the weather over the past ten Novembers.

Hourly earnings rose 0.2% as expected and the work week was unchanged. The private sector added 147k jobs, which is comparable to the three month average through October. Factory payrolls fell 7k (loses in food processing and chemicals offset gains in the auto sector). Other details, including alternative and broader measures of unemployment and employment insecurity eased.

The outlook for next week's FOMC meeting never turned on one piece of high frequency data. It is still poised to increase its long-term asset purchases as Operation Twist runs down.

Canada also reported a better than expected employment report. It created 59.3k jobs, more than 5 times greater than the consensus. The unemployment rate fell to 7.2% from 7.4%. The job gains were almost exclusively full time work. The weakness of the report came from the goods producing sector, which lost 6.2k jobs. Manufacturing itself lost almost 20k jobs. The service sector grew 65.7k jobs.

The US dollar has convincingly fallen through CAD0.99, which has been a base that has largest held since over the past six weeks. If this is confirmed on a weekly closing basis, it may signal a move toward CAD0.98.

The euro has bounced off the $1.2877 low, a two week lows. There has been a change in sentiment toward the euro following news that the ECB may be closer to cutting interest rates than the market had previously anticipated. This sense was strengthened by the Bundesbank's cut in its German economic forecast a few hours before Germany reported a surprisingly poor industrial output data.