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Trade Desk Thoughts: Labor Market Still Bleeding

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Trade Desk Thoughts:

Labor Market Still Bleeding

The labor data numbers released for October are rather poor, with the economy shedding another 190K jobs, from which 120K were from the goods-production sector. However, the infamous death/birth model added another 86K jobs to the economy in October, taking the total number of jobs added to 641K so far, this year.  

The unemployment rate surged 0.4% in October from the prior month, to reach 10.2%, the highest unemployment rate since April 1983. At the same time, the total unemployment rate, also known as U-6, had surged to an impressive 17.5%, up from 11.1% just one year ahead.

The rising unemployment rate coupled with companies that still shed jobs can only have a negative effect in the real economy, reducing consumer spending that makes up about 2/3 of the GDP.

This report had a strong initial effect on the global markets, with S&P futures bouncing off the 1060 resistance and with the Usd/Yen yen falling 60 pips, down to the 90.00 area. In the commodity market, a bleeding economy means that less energy is needed, something that allowed crude oil shed $2 in a relatively short period.

Just ahead of the NFP report the market absorbed data from the Canadian labor market that also came in weaker than excepted for the month of October. To some extent, this shows the degree to which the two economies are connected.

The weak labor data coming from Canada and the U.S.  had a negative effect on the value of the Canadian dollar, which dropped 130 pips, after being in a 60-pip range over the last two days of trading.

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