Nonfarm Payroll Report “Rocks”

US nonfarm payroll “rocks”. Traders were pleasantly surprised today as well as politicians and economists when the nonfarm payroll data was released. Markets were expecting a meager increase of 85K jobs and the unemployment rate to hold at 7.9%. There were no revisions expected for prior months. Many traders had positioned themselves ahead of the release for a negative report, and expected to see the US dollar tumble at the release. Boy were they wrong. Talk about a surprise. The unemployment rate dipped and job creation remained steady in November, as the U.S. economy shrugged off any major impact from Hurricane Sandy and showed surprising resilience in the run-up to the fiscal cliff.

The November jobs report, released Friday morning, was a pleasant surprise to analysts who had braced for some ugly numbers for a period when much of the Northeast was reeling from the superstorm. In fact, the national unemployment rate fell to 7.7 percent from 7.9 percent, and the nation added 146,000 jobs, not the mere 85,000 that forecasters had expected. The economic recovery that traders hope was underway seems to be growing steadily but at an unspectacular pace was not undone either by the hurricane or by anxiety over looming austerity — the tax hikes and spending cuts scheduled to take effect Jan. 1 if Congress and the White House can’t agree on a deal.

Forecasters had expected a significant impact from Sandy, which struck at the end of October and disrupted business in large parts of New Jersey, New York and surrounding states. The level of new claims for unemployment benefits spiked from about 370,000 before the storm to 451,000 in the first week of November.

With the FOMC meeting scheduled for next week, traders are now increasing their odds that the Feds will not add to its stimulus package in December and will hold off until the beginning of next year, after lawmakers have resolved the US Fiscal Crisis. This offers support for the greenback.

The EUR/USD tumbled immediately after the release to trade at 1.2906 and the US dollar was stronger against almost all of the crosses with the USD/JPY climbing to 82.67. The US Dollar Index rose to 80.55 gaining close to 30points. Gold remained flat today moving between small losses and small gains, to trade at 1703.25 after the release.

Market focus will now follow closely the US Federal Reserve decision early in the week. Markets are expected to remain quiet on Monday with no other central banks on the docket and very little in the way of eco data. Traders will keep an eye on US lawmakers.