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Global Central Bank Policies for Week Ended September 4

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Global Central Bank Policies for Week Ended September 4 PART 1 OF 4

Disappointing Nonfarm Payroll Weighs on Dollar and Rate Hike

Labor data, a mixed bag

The U.S. Bureau of Labor Statistics published its data on nonfarm payrolls (or NFP) and unemployment claims on September 4, 2015. NFP numbers were disappointing, coming in 173,000 below forecasts and the previous month’s revised figure of 245,000. Jobs gain was mainly in the healthcare and social assistance sectors, while the manufacturing and mining sectors lost the maximum number of jobs. In contrast to the NFP numbers, unemployment claims came in at a near seven-year low of 5.1%, beating the forecast of 5.2%.

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Dollar reacts to Lacker speech and labor data

Jeffrey M. Lacker, president of the Federal Reserve Bank of Richmond, gave a speech at the Retail Merchants Association in Richmond titled “The Case Against Further Delay.” Many viewed his speech as hawkish, favoring a rate hike sooner than later, since he focused on rising household spending that has picked up over the last two years.

Lacker gave his speech just before the labor data were released. The positive unemployment rate and Lacker’s hawkish view saw the dollar spike to 96.57 at the time the data were released. Later in the day, much of the gains fell off as NFP data might have been weighing down the possibility of a rate hike at the next FOMC (Federal Open Market Committee) meeting. The dollar index eventually fell 0.19% to 96.22 toward the end of the day.

Impact on the market

The SPDR S&P Metals and Mining ETF (XME) showed a loss of 1.68% on September 4, 2015, after the nonfarm payroll numbers showed a rather negative outlook for the mining industry. The SPDR S&P Retail ETF (XRT), a retail sector fund, wasn’t affected much, closing the day at -0.79%.

The better-than-expected unemployment numbers, except in the manufacturing and mining sectors, meant that some other sectors like technology saw some uptick. Among these, Electronic Arts (EA) and Micron Technology (MU) rose 1.57% and 1.99%, respectively. Motorola Solutions (MSI) also showed a rise of 1.84%.

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