Dollar Wobbles Despite Jobs Growth

Small- and medium-sized businesses are driving job growth in the U.S., according to the latest data. The ADP National Employment report shows employment statistics are up for the …

Small- and medium-sized businesses are driving job growth in the U.S., according to the latest data. The ADP National Employment report shows employment statistics are up for the nineteenth straight month in the private sector. The service sector has contributed largely to the positive growth, while employment in the manufacturing sector has waned. Despite good overall numbers, the U.S. dollar is not responding in predictable fashion, although other factors like the European debt crisis are vying for influence in the currency market. For more on this continue reading the following article from TheStreet.

THE TAKEAWAY: U.S. ADP employment change came in better than forecast > More job creations in service sector > U.S. dollar declines versus its major peers

The monthly ADP National Employment report showed that U.S. companies hired 110 thousand workers more in October, marking nineteenth consecutive months of job creation in private sector. The reading exceeds median forecast from Bloomberg survey as forty-one economists called for an increase of only 100 thousand, with projections ranging from an advance of 38 thousand to 150 thousand. September figure was revised upward to a gain of 116 thousand from 91 thousand. As the ADP employment change is considered a precursor to the non-farm payrolls number, a better-than-forecast figure today raised hope that non-farm payrolls reading released this Friday might exceed expectations as well. Non-farm payroll figure was predicted to climb by 95 thousand in October after September’s reading surprisingly rose 103 thousand amid forecast of a merely 60-thousand gain.

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In terms of size-based companies, gain in employment in small- and medium-sized businesses entirely contributed to the total 110 thousand jobs gain this month. Small firms added 58 thousand jobs in the month compared to 60 thousands in September. Medium firms employed 53 thousand more workers, well above 36 thousand new hires in the preceding month. On the other hand, large firms slash 1 thousand jobs, following 5 thousand jobs cut in the previous month. Regarding to sector, service-producing companies generated 114 thousand jobs. In contrast, employment in manufacturing and good-producing sectors deteriorated. Factories continued to cut 8 thousand workers after reducing 5 thousands ones in the preceding month. Likewise, good producers cut 4 thousand jobs after adding a meager 1 thousand jobs in September.

Market participants have shown bearish reactions regarding to the dollar despite of unexpectedly improved labor result for October as Federal Open Market Committee meeting at 12:30 Eastern Time today takes center stage. Though the ADP employment change printed better than forecast, the U.S dollar weakened versus all of its major trading partners because speculation on another round of quantitative easing heightened. As can be seen from the 1-minute GBPUSD chart above, the currency pair climbed 30 pips from 1.6005 to 1.6035 following the release. The Relative Strength Indicator crossing above the 70-level twice indicated that currency traders was massive selling the dollar in favor of the sterling. At the time this report was written, a British pound traded at 1.60291 U.S. dollar. The greenback might slide further if Fed signals any hint of stimulus package to boost economy in its FOMC meeting today.

This article was republished with permission from TheStreet.


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