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Non-Farm Payrolls Falls 651K, Unemployment Rate Hits 25Yr High

Last updated 3/6/2009 8:51 AM ET (GMT -5) 0 Comments - Add your comment

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Kathy Lien

Director of Currency Research, GFT

A total of 651k jobs were cut by US corporations in the month of February.  Since January 2008, more than 4.2 million Americans have lost their jobs. This represent a rebound from the previous month but only a very mild one after another 57k jobs cuts were tacked onto the January data. With the downward revision, January represented the single worst month for the labor market since 1945.  The unemployment rate hit 8.1 percent, the highest level in 25 years. Nearly all sectors of the US economy cut jobs except for education and government.  In response to the payrolls numbers, there was some brutal initial spikes, but other than that, it has been anti-climatic.  From all angles this negative number represents severe weakness in the US economy but going into the release, there was a rumor that non-farm payrolls could fall by 1 million. The fact that the data was better than the whisper number actually led to an initial rally in the US dollar against the Japanese Yen. .  

Source: FX360.com

The first reaction was an improvement in risk appetite, with the EUR/USD and GBP/USD rallying as safe haven flows diminish. In general, the payrolls report will probably not have a lasting impact on the US dollar because it represents the same old depressing story of massive job losses.  Weakness in the US economy has been discounted and in many regards, traders are focusing on what's in store for the next months and they are relieved that job losses did not hit 1 million. Alot of fiscal stimulus is in the pipelines which could help stimulate the US economy and if China comes through with a stimulus for their own country, it will benefit everyone.

On a side note, the employment component of the service sector ISM report has correctly forecasted a rebound in February but a very marginal one. 

Here's the head of PIMCO's take on the employment numbers

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.