Yet Another Non-Farm Payroll Surprise

Includes: FXE, UDN, UUP
by: Ralph Shell

Today's NFP report produced, guess what, another surprise. Before going there, however, it is best to review the previous report. The NFP for August was terrible, with only 96K jobs created, and there was a 20K downward adjustment in the July report. Even more damaging was the report that the participation rate of Americans working went down to 63.5%, a new low.

Apparently the Fed regarded the poor labor numbers as a call for action, and the consequent approval of QE3. With Bernanke committing to $40B purchases of various bond maturities per month, this pending action has been a factor in the appreciation of equities, commodities, and depreciation of the USD. Since the previous week's labor numbers have been revised upwards, we wonder if the market's response is a bit tenuous.

Today's numbers, 114K new jobs created in September, and an unemployment rate of 7.8%, the lowest since President Obama has been in office has the media excited. These are the kind of numbers the media thinks are needed to guarantee the President's re-election. Some of the revised increase in employment during the third quarter came from the addition of 73,000 government jobs.

There are other confusing numbers in the report. The Household Survey, another part of the NFP report, reported an increase of 873,000 jobs in September. This is the largest one month increase in jobs since June of 1983, during the Reagan recovery.

So third quarter jobs are low balled to get the Fed involved with their new liquidity injection. Then, the good report come out to give the President a boost five weeks ahead of the election. Never mind the U6 jobless rate remained unchanged at a lofty 14.7%.

After the numbers came out, the former head of GE, Jack Welch had this to say:

"Obama is manipulating the jobs numbers because his debate performance was awful...Unbelievable job numbers..Those Chicago guys will do anything..can't debate so change the numbers."

Are these numbers real, indicative the US is in a mild recovery mode, or are they merely distorted propaganda from the boys and girls at the Dept of Labor trying to get their president re-elected. In either case it seems very risky assuming positions based upon questionable data.

Weather the unemployment rate in the US is 7.8% or 8.1%, it is a lot better than the record 11.4% in Europe. Still, the euro versus the USD has had a good week, and has produced an engulfing candle from the previous week. It will be interesting to see if the euro can break out and remain above the 1.3170 resistance. (EURUSD, FXE. UUP) Should it fail at that level, we will then be approaching the pair from the short side.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.