U.S. Non-Farm Payrolls Fall 240K in October, Unemployment Rate Surges to 14 Year High But What About the Dollar?

Daily Forex Fundamentals | Written by DailyFX | Nov 07 08 14:16 GMT |

U.S. Non-Farm Payrolls fell 240K in October following a 284K decline in September, and has certainly raised concerns that conditions may only get worse over the coming months as fears of a global meltdown intensify. In addition, the unemployment rate surged to 6.5% from 6.1% in the previous month to reach its highest level in 14 years. Meanwhile, Manufacturing Payrolls declined 90K during the same period despite expectations for a 65K decline. The data suggests that private-sector consumption will weaken further as employment opportunities become increasingly scarce, which could lead policy makers to increase their efforts in order to avoid a deep and prolonged recession. Moreover, the larger than expected decline in employment failed to trigger a sell off in the U.S. dollar as the markets were already pricing a turn for the worst in the labor market. Despite the lack of reaction to the dismal data, the growth outlook for the world's largest economy has become increasingly bleak throughout the second half of the year, and economic activity may remain subdued well into 2009. Forecast for U.S. dollar There is a growing concern among foreign investors that any politically motivated measure will fail to restore investor's confidence in the global financial system and given the current market environment of uncertainty and de-leveraging in financial markets, the U.S. dollar is likely to remain vulnerable against lower yielding currencies like the Japanese yen. Moreover, even though the United States Federal Reserve has been taking a number of actions to stabilize financial markets, the U.S. economy will continue to face substantial challenges including further job losses, high energy prices and a rapid deleveraging in the financial sector. In addition, other investors are concerned with the fiscal impact of the bailout plan which could cost almost 5 percent of GDP. Currently, the United States federal government runs a deficit of $438bn, or 3 per cent of gross domestic product and the bailout costs could push the fiscal deficit next year to $1 trillion or 7% of GDP. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.