US Non-farm Payrolls Sharply Surpass Market Expectations

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Jan 06, 2012, 01:00 ET

LONDON, January 6, 2012 /PRNewswire/ --

US Non-farm payrolls and private payrolls have sharply surpassed market expectations, with the US unemployment rate hitting its lowest level in nearly three years.

This has triggered a greater appetite for risk amongst investors, in the hopes of economic recovery, while pushing the UK FTSE 100 higher by 0.5% in the minutes immediately following the release of the figures.

Recent US economic data which outperformed market expectations and brightened optimism for US growth in the near to medium term inspired a positive consensus earlier in the month.

The latest release of US non-farm payrolls, private payrolls and unemployment rate gives investors another chance to gauge the strength of the US economic recovery, as both non-farm and private payrolls rose to 200,000 and 212,000 from 120,000 and 140,000 respectively, surpassing the consensus.

    
    US Payrolls
                                Prior      Consensus         Actual
    Non-farm Payrolls         120,000        150,000        200,000
    Private Payrolls          140,000        160,000        212,000
    Unemployment Rate            8.6%           8.7%           8.5%

The figure released is the change in payrolls compared to the previous month, and is usually between +10,000 and +250,000 during non-recessional times. The number represents the number of jobs added or lost in the economy over the last month.

Non-farm payroll employment is an influential statistic and economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labour market which in turn affects the foreign exchange market, the bond market, and the stock market.

Joshua Raymond, Chief Market Strategist at City Index (http://www.cityindex.co.uk/) said "This is a really good set of results and comes in line with the general theme of US economic data improving sharply over the last month or so."

"A recovery in the US labour market is a key element needed to boost US growth and general economic health, and while these job numbers are not heralding a confirmation of this yet, it is a strong step in the right direction. "

The strong correlation shows just how important non-farm payrolls are for equity demand and the health of the US economy in general.

Despite the leap in payrolls, traders would be naive to believe that the US labour market woes are over in light of today's figures. The recovery of the US economy is likely to be confirmed during the following months.

Historically, non-farm payrolls typically create large swings in the prices of the FTSE 100 and Wall Street Indices, as well as major currency pairs such as the euro/dollar and sterling/dollar.

The euro/dollar currency pair hit a new 16-month low this week and traded below key support levels of $1.29. Now that a strong jobs report has emerged this could strengthen the greenback currency even further. Meanwhile, the FTSE 100 rose 0.5% in the minutes immediately following the release of the figures.

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Source: http://www.cityindex.co.uk/market-analysis/non-farm-payrolls.aspx

SOURCE City Index