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On Wednesday evening, November’s ADP Nonfarm Employment Change numbers were released, vastly underperforming expectations with an increase of 127,000 private payroll jobs, well below the estimate of 190,000 and the previous month’s 239,000.
The leisure and hospitality sector was the largest gainer, with an increase in 224,000 jobs. The most significant sector losses include manufacturing, with a drop of 100,000 jobs, and professional and business services, with a drop of 77,000 jobs.
The loosening of America’s historically tight labour market comes shortly after the dovish mood set by the recent FOMC minutes, where members of the Fed committee revealed dovish tendencies in light of a 50-50 assessment of the risk of a recession.
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The Fed’s twin primary mandates are: keeping inflation low and maximising employment. These are two opposing factors since high demand for workers will ostensibly drive up wages and spur inflation. Since the central bank has to balance these two, interest rate hikes, the Fed’s preferred tool to control inflation, will be paced accordingly should the US economy – and thus jobs – be threatened.
A dovish outlook and poor jobs data have sent the dollar tumbling from the 107 area to below 106, especially since this bodes a slower pace for rate hikes coming from the Fed.
While the Fed Fund rates have been raised 6 times for 2022 to the current range of 4.25%-4.50%, the unemployment rate is still 3.7%, near the lowest since 1969.
A more closely-watched employment figure is the Nonfarm Payrolls data released by the Bureau of Labour Statistics. Current forecasts place an increase of 200,000 jobs, down from the previous month’s 261,000.
Investors are strongly advised to watch out for the NFP, which will be released at 15:30 (GMT+2) on Friday, 2 December.
As a friendly reminder, do keep an eye on market changes, control your positions, and manage your risk well.
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