September Jobs Miss Made Up by Strong Revision

The US economy grew a disappointing 134k jobs last month.  It is weakest job creation this year.  However, the sting is offset by the strong upward revision in August to 270 (+69k) and a more modest revision (18k) in July.  It puts the Q3 average at 190k, which is healthy by any measure, even if slower than the ~218k average in H1.   The initial market reaction suggests the data was sufficient to support the new higher yield and stronger dollar environment.  

Hourly earnings rose 0.3%, as economists expected, and the year-over-year rate slipped from 2.9% to 2.8%.  The unemployment rate fell more than expected to 3.7% from 3.9%. However, disappointingly, the underemployment rate ticked up to 7.5% from 7.4%.  The participation rate was unchanged at 62.7%.  Of note, the August decline in manufacturing jobs, the first of the year, was revised away and instead of falling 3k, it rose 5k.  Manufacturing added another 18k jobs in September.  This year, manufacturing jobs have grown 21k on averae a month compared with 17k last year.  

The US also reported the August trade balance.  It was as expected at about $53.2 bln, representing a small widening.   Imports rose 0.6% in August, while exports fell 0.8%.  We suspect that growth differentials largely explain the deterioration of the US trade balance rather than tariffs and counter-tariffs.   That said, the export of soybeans, likely related to retaliatory tariffs, accounted for $1 bln of the $1.7 bln decline in exports.   The unadjusted merchandise trade deficit grew to a record with China ($36.6 bln ) and Mexico ($8.7 bln).

Separately, Canada reported strong data.  Its merchandise trade balance was in surplus (C$530 mln) for the first time since December 2016.  The economy created 63k jobs, well more than the 25k the median guesstimate in the Bloomberg survey.  The participation rate ticked up but the unemployment rate was eased to 5.9% from 6.0%)However, some of the employment details were more disappointing than the headline.  Canada lost nearly 17k full-time positions.  Economists had expected a gain of nearly as many.   Hourly earnings for permanent workers slowed to 2.2% from 2.6%.  

The US dollar has traded modestly lower, which following the gains earlier this week, seem a bit like having bought the rumor, players are selling the fact.  US rates remain firm.   While the intraday technical indicators leave scope for additional dollar losses, we suspect they will be limited, and nervousness over the re-opening of Chinese markets next week, deter much risk-off ahead of the weekend.   

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