FX analysis: US payrolls plunge to 12,000 amid storms and strikes – London Business News | Londonlovesbusiness.com

US yields and the dollar have fallen after the US economy added only 12,000 jobs in October.

While significantly affected by consecutive hurricanes in Florida and a worker strike at Boeing, the figure is still well below the median estimate.

The unemployment rate, meanwhile, held at 4.1%.

Under normal circumstances this would be a hugely damaging report for the dollar and 50bp rate cuts would suddenly be thrown back into the discussion.

But markets are rightly avoiding an overreaction – the Boeing strikes account for around 40,000 jobs, and the BLS cannot quantify the hurricane impact.  The unemployment rate is the only clear signal here, and that continues to point to a stabilising labour market.

That said, it is well below most of the forecasts, where assumingly everyone took the circumstances into account. It suggests there could be a drop off in hiring layered on top of the temporary factors, but we will have to wait until next month’s report for a less noisy view.

What is as clear as ever is that traders cannot take first estimates of payrolls as gospel. The market relied on upward revisions and a strong report last time around to price in a likely Fed pause in December, and since then 112,000 have been knocked off the total for August and September. That likely explains a good proportion of the dollar’s weakness.