The US job market is always good for a surprise – Commerzbank

What a US jobs report! Not only was the actual number higher than economists in a Bloomberg survey expected, but the last two months were revised much higher and the jobless rate surprisingly fell, notes Michael Pfister, FX analyst at Commerzbank.

The US economy is slowing but remains solid

“Average job growth in the last quarter was actually slightly higher than the average in the second quarter. And the July jobs report, which sent shockwaves through the market in early August, looks less scary after the revision.”

“Firstly, the market reaction was textbook: the USD rose sharply and a 25bp cut was removed from the curve. The result is that interest rate expectations now look much more realistic, meaning the market appears to support our economists’ view that the Fed will cut rates by 25 basis points per meeting in the coming meetings, rather than the more 50 basis point pace . .”

“The numbers have once again confirmed something essential: We simply shouldn’t over-interpret a single data point in the payrolls at this time, both in terms of positive and negative surprises. Friday’s figure is also likely to be revised several times. More important for the Fed’s decisions will be the medium-term trend in the number of jobs created. And this underlying trend tends to confirm the pre-summer view that the US economy is slowing but remains solid. Instead, you should not bet too much against the USD.”