NFP Quick Analysis: double disappointment does not derail the Fed

• The Non-Farm Payrolls was expected to be a "normal" one with 192,000 jobs gained and wages rising by 0.2% MoM and 2.7% YoY.
• Actual figures came out at 164,000 on the headline with wages up 0.1% MoM and 2.6% YoY, both disappointing. 
• The Fed is unlikely to change its plans to raise interest in June, at least not according to this report.

The US Non-Farm Payrolls report is a double disappointment: 164,000 jobs gained is worse than 192,000 expected. There is a silver lining: the March report saw an upgrade from 103,000 to 135,000, not as bad as expected.

With wages, there is no silver lining. Average Hourly Earnings rose by 0.1% MoM and 2.6% YoY, both below expectations. The revision for March was to the downside: 0.2% MoM against 0.3% originally reported. Without wage inflation, it is hard to see core inflation rising. 

Other figures are mixed: the Average Workweek came out at 34.5 hours, as expected and exactly like the previous release. The unemployment rate dropped to 3.9% which is good news for President Donald Trump.

Fed will go ahead

The Federal Reserve did not state that they are going to raise rates in June, but it is deep in the price. The jobs report can be described as mediocre but not a total disaster. The US is gaining jobs and wages are rising at an OK pace. The Fed remains upbeat about inflation and there is no shocking warning sign.

In addition, we have seen how the effect of the early Easter holiday has caused some data discrepancies in Europe for April's economic figures. The Fed may dismiss it for now. Another such double disappointment may make them think, but things are still quite alright.

Update: After the initial fall, the US Dollar made an impressive comeback. The EUR/USD dropped to the lowest levels of 2018 below $1.1910. The GBP/USD fell under $1.3500. Other currencies are also feeling the force of the US Dollar. 

More: US Dollar rebounds from lows near 92.40 on Payrolls

Background

Expectations before the event stood at a return to a normal read of the US labor market. After only 103,000 jobs were gained in March, a rise of 192,000 was expected. Average Hourly Earnings, or wages, were also projected to print an OK read, repeating the 2.7% YoY increase and with a slight monthly slowdown to 0.2% against 0.3% last time. 

The Unemployment Rate was projected to drop from 4.1% to 4% and the Average Workweek to remain at 34.5 hours. 

The US Dollar was on a roll during the week, enjoying high, yet not rising yields and an extension of the previous trend as other economies seems to struggle. The Fed left interest rates unchanged as expected and the message was modestly dovish, albeit the consequent US Dollar weakness was shortlived. 

See: Nonfarm Payroll preview: employment data not expected to impress