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Andrei Tratseuski
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Andrei Tratseuski currently works as a Currency Analyst at Forex Club LLC. Andrei was a key speaker at 2011 New York and Dallas Trader's Expo, his work appeared in variety of publication both online and print. Recently Andrei's commentary appeared on WABC Radio, Nasdaq.com, MarketWatch,... More
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  • Digesting US employment 0 comments
    Jul 2, 2010 10:15 AM | about stocks: ADE, BEO, BEP-RETIRED, CNY, ERO, EWA, EZU, FEZ, FXB, FXC, FXE, FXF, FXY, GBB, GLD, GRE, JYF, JYN, NFP, SPY, SPY, UDN, USD, UUP, VCR, XLY, YCL, YCS, DJ, IWB, SPXL
    Digesting this data is sort of complicated. In order to gain all of the jobs lost during the recent recession it will take up to 6 years. The job creation assumes we continue to create jobs at the current rate. Otherwise, the data that has been printed was not as pleasant as anticipated. Some figures were clearly positive, while other figures completely deteriorated the optimism of the US economy. First figure that the Main Street and government will pay attention to is unemployment rate. The government likes to blow the horn about how unemployment is coming down. Yet, the rate of this growth is modest at best. Unemployment dropped to 9.5%, clearly a positive sign. Another positive sign that we seen in the numbers is the job creation in the private sector. Private sector added jobs for six consecutive month. In June, private sector added 83,000 jobs.

    However, the employment report is posing as a pig in a nice outfit with plenty of make up. Prudent investors seen this right away, and the reaction could be seen in the EUR/USD. Since the sovereign debt issues in Europe are starting to fade away and US economy starting to show signs of weakness, the Euro climbed to 1.26 against the greenback. Looking closer at the employment figures, we notice the following dilemma with a robust growth: The number of hours worked by an individual has slipped while the earnings came down as well. Now, let's ponder about this in more depth. Earnings of an individual have went down by 0.1% in June, clearly a negative notion. Meanwhile, the amount of hours worked by the same individual went down as well. The following has not even occur when the US was in a recession. How can a consumer, which by the way represents roughly 70% of the economy, continue to stimulate the economy if his or her paycheck is getting smaller and they spend less time at work. Thereafter, the manufacturing sector has so far been pulling the US economy, kicking and screaming, out of the recession. However, looking at the current situation, the manufacturing sector is slipping in its growth. Manufacturing sector added merely 9,000 jobs compared to 32,000 in the previous month.

    The current mantra of the markets is the following: US economy is showing signs of weakness. The answer to why it's getting weak is the fact that the government no longer stimulating the growth. This can be seen in job reports, housing reports, and spreading into other factors of the economy. Since, US economy is showing weakness and European situation is getting taken care of, we should expect the Euro to rise in near term. Keep in mind that the Non-Farm Payrolls will continue to show signs of weakness as Census Workers are beginning to be shed from their posts. To reiterate, the Euro will likely to gain strength as investors look for stronger economies. Furthermore, the US needs to show unstimulated growth to convince the markets that everything is jolly in the biggest economy in the world.

    Now let's see how really bad the report was compared to the previous month:


     



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