Job Numbers Don't Freak Out Dollar Bulls

US non-farm payrolls data was bad, quite bad, but not terribly bad. When the US economy is in such a bad state, it takes quite a lot to shock. Anyway here are the numbers: The US unemployment rate unexpectedly jumped to 6.1% in August from 5.7% in July, much more than the 5.8% expected by the market. That is the highest unemployment rate in five years. The jobs number also came in worse than many expected; 84,000 jobs were lost, versus the 71,000 expected. But hey, it’s not more than 100,000 is it? Back in June, employers got rid of a whopping 100,000 jobs, so 84,000 doesn’t have too much of a shock value. As for July, the job loss was revised upward from 51,000 to 60,000.

The economic recession and housing market slump has forced many companies to cut hiring and slash existing jobs so as to stay afloat. Jobs were lost across the board, ranging from automakers, factories, construction, retailers to professional and business services, except government, health and education sectors which saw some increase in employment. Somewhere there is a slight positive though: The construction industry only lost 8,000 jobs, compared with a 3-month average of 26,000 jobs lost. That’s an improvement.

Even though the US dollar immediately fell against other major currencies such as the Euro, Swiss franc and the British pound in forex trading (with the exception of yen), with the USD falling 130 pips against the Euro and 80 pips against the Swiss franc, the ultra-strong USD managed to erase almost or all of its initial knee-jerk losses within the 4 hours after the data.

What does that say about the dollar? Dollar bulls are still ruling the game, unwilling to give up their positions just because of a near-miss NFP.

Comments

[dlaw:]

Dollar bears are in full flight - but how can it be? Debt is high.The balance of payments is terrible. The American economy is headed for trouble.

It actually makes a lot of sense. See my blog: financialroadtosociali...

May you live in interesting times.

2008 Sep 05 03:59 PM

[Alex Filonov:]

It's deflation. Dollar goes up because demands for dollars is higher than supply.

2008 Sep 05 04:54 PM

[Jason Rines...:]

Exactly Muddling.

"except government, health and education sectors which saw some increase in employment."

Glad a couple of my sectors I am in are now seeing daylight (no not in government). Perhaps every dog has his day and fundamentals still do matter.

2008 Sep 05 05:13 PM

[dlaw:]

So what you're saying, Muddling, is that the dollar is going up because the dollar is going up.

2008 Sep 05 08:40 PM

[dlaw:]

And where does this lack of supply come from?

You think the Fed needs to print more dollars?

2008 Sep 05 08:41 PM

[Dame Daxx:]

The US has problems because of Housing. The EuroZone has problems because of the Strong Euro. The UK has Housing problems but while it is in the EU it is outside the Euro. Spain and Ireland have Housing problems but they are a small part of the EuroZone.

So a Stronger Dollar helps the Euro zone. I don't see how it helps the US.

2008 Sep 05 09:40 PM

[Lou Thomas:]

Data was "quite bad, but not terribly bad." Just bad enough, then. Is that what we mean these days by the Goldilocks economy?

This column doestn't tell us a lot that we couldn't have read from the charts, but it does provide a nice little irritating grain of sand around which we unwashed folks can post our little pearls of wisdom.

Some of the other posters have opined that deflation might be the reason that the dollar is up vs. the Euro. Certainly, when you wipe out huge amounts of financial paper through write-downs and deleveraging, you reduce the number of dollars in circulation.

But consider that there is over $6 trillion in cumulative trade surplus waiting to rush in to fill that hole by buying up our businesses for a fraction of their earlier values. Did you notice that there are now 26 Sovereign Wealth Funds with over $2 trillion in dollars waiting to roll into the U.S. with their carpetbags? The IMF tried to get them to subscribe to a voluntary code of behavior last week, and they said, "OK, so long as there is no transparency and no enforcement mechanism." They are getting ready to put those dollars back into circulation.

With the U.S. consumer tapped out, there is less incentive for these export-oriented nations to continue to prop up the dollar so that they can sell to the U.S. Maybe if Europe is in better (not good, just better) shape they will buy some Eurozone treasuries to prop up the Euro so that they can start selling more there. And, of course, they will start to grow their middle classes, but that could take a few years to accomplish.

When the SWFs get here with their big empty shopping bags, will there be enough desirable businesses to consume all of those foreign-held greenbacks, given the cratering of the stock market and the U.S. economy? Already, we see Lehman walking around with its hat in its hand, sipping on a bottle of low cost gin and hallucinating contributors out of the shadows. Financials have been a rather harsh experience for foreign investors. If they don't get something more to their liking, how long will it be before those dollars find their way onto the forex markets to obtain the currencies of other nations that still have something to export? Then where will the dollar be going?

And let's not forget about *dis*-investment. The market is tanking. Fannie and Freddie are tanking. Oops - breaking news - U.S. is assuming Fannie and Freddie's debt - which makes me wonder: will the U.S. Treasury be able to retain the AAA rating on its bonds? Just one of those vile thoughts that sneaks in when everything is going to seed (and that's a euphemism).

Yes, the Euro has problems, but nothing like those of the U.S. The dollar is heading down. I live in the U.S., but still with all of our aggressive, illegal invasions, its hard to complain about this present turn of events. Hope that we can patch things together eventually and become a kinder, gentler place that only invades other nations, say, every twenty years or so. Here's a wild thought: make them save up the money in advance *before* they can have a war. *That* should keep things relatively peaceful. We U.S. citizens need to work on developing a sense of shame and disgust; this is my little contribution to that project.

2008 Sep 05 10:52 PM

[nukldrager:]

Lou, the US will save up before a war as soon as the powerful group of lawyers, aka US Congress, adopts the British rule where the party that looses the case pays the costs of the case. And it will coincide with the central bankers extending their gregariousness beyond mere bankers and corporations, who screw up and need a second, third, umteenth chance with a bailout, writedown, outright gift in order to stay solvent, to the unwashed masses that have to play "fair" and pick themselves up by themselves when they screw up. What's the difference between breadlines and bailout's? Lobbyists

2008 Sep 06 09:53 AM

[STEVE35:]

On this job lost, does this mean people with 5 jobs just 2 of the 5? From 1952 until 2001 I had only one job at a time and my wives never worked as long as I was around. Now everyone is not saving but spending the their checks on worthless goods from walmart that they can't afford, don't need, and trying to impress others. How my cell phones do you need? I have a business and I haven't owned a cell in 10 years. My regular phone and email work just fine. I dont know the average cell bill is but listening to people they spend on the average of $75 to 150 a month. Just take the 75 and multiple it by 12 x and you have 900 bucks a year. 10 years that's 9000. Put all that into same plan and you will have a hell of a nest egg. Right now my phone bill is $10.00 a month. Now I have Magicjack.com costing me $19 A YEAR.
I save anywhere between $1,000 and $3000 each month using this system. I do lots of faxing my catalog to clients and there is the big savings aside with hours of talking to customers and only cost me $19. a year. The saving go into stocks with good returns making me even more money......Steve
lookusup.com

2008 Sep 06 04:21 PM

[curious cat:]

steve35,

you make a great point. americans spend money as if they are rich. they do not grow their own food, that's fine, but can't they make a few meals at home, instead of eating out all the time? maybe even make a loaf of bread themselves, now and then? they want to see movies, but why can't they rent a dvd instead of going to the theater? can't they wash their cars at home? can't they make their own coffee? and, i'm with you on phones.

every doctor i know complains about having to carry a beeper or cell phone, but joe citizen seems to think they need one, please. just how important are you that you cannot wait to get where you're going before you call someone or check your messages? if you are not a doctor or drug dealer, it can probably wait. i have never owned a cell phone and i have not worn a watch in thirty years. what's the point? where can you go that you cannot find out what time it is?

if you are so rushed that your schedule requires pinpoint accuracy, you will receive health benefits by cutting yourself some slack. and, who are these ipod people? try humming a few songs to yourself, my friends. get in touch with your own voice. do they have so much money that they have to keep down loading ring tones? oh, my god!

i have another money saving suggestion for you. remind your spouse and children that you are not made of money and cannot afford to waste any more on frivilous purchases. if you have more shoes than imelda marcos, you better own your own island.

here is what you do need because they support you all day and night: good shoes, good tires, good mattress, but you don't need more than your fair share, ok? wal-mart has all three.

here is what most of you do not need: a manicure, a dye job, a nose job, orthodontia, a boob job, a haircut that costs more than you make in an hour, another purse, another golf club, another computer, another computer game, another car (if yours has less than 150,000 miles on the odometer-and that's being generous cause if you change the oil regularly, a good used car can go almost forever.) just compare the cost of a new car to the amount you must pay to maintain the old one. remember that the new one costs more in insurance and taxes.

half of your car trips are unnecessary too. still have to make a trip or buy something? well, follow a few simple rules. plan ahead and you can combine that trip to the post office and the one to the grocery store and the one to get gas. use your phone book and make a few calls to find out store hours, product availability, price comparison info. then, shop on line and have the nice ups or fed x people deliver it to your door.

ok, i used to work 60-80 hours a week. now, i'm 55 and retired. i stay home, watch cable, surf the net, exercise, water the vegetable garden, read books. i can do that because, even though i lost a ton of money in the stock market, i am very low maintenance. the reason most people cannot retire is their desire to live a high life.

do you really want to travel? join the service or get a job on a cruise ship. do you love new clothes? learn to sew and design your own. have to have a computer? read some books and buy some parts. love tennis? string your own raquets and use the public courts. love golfing? some courses let you use the facilities if you contribute to maintenance or caddie. whatever your love in life might be, there is a less expensive alternative, a more rewarding and complete experience that comes from expending more effort rather than money.

2008 Sep 07 04:11 AM