The US dollar strengthened to close out the trading week as financial markets digested the second consecutive worse-than-expected monthly jobs report. The greenback has recently struggled to carve out gains on almost certain expectations that the Federal Reserve will cut interest rates. At the same time, worrying economic data could spark safe-haven demand for the buck.
According to the Bureau of Labor Statistics (BLS), the US economy added a smaller-than-expected 142,000 new jobs in August, up from a downwardly revised 89,000 in July. The market had penciled in a reading of 160,000.
The unemployment rate dipped to 4.2% last month, down from 4.3% in July.
Average hourly earnings rose 0.4% month-over-month, up from the downwardly adjusted -0.1% in the previous month. Average hourly earnings also advanced 3.8% year-over-year, up from 3.6% and higher than the market forecast of 3.7%.
The labor force participation rate was unchanged at 62.7%. Average weekly hours ticked up to 34.3, and the U-6 unemployment edged up to 7.9%.
Most of the job creation was concentrated in construction (34,000), health care (31,000), government (24,000), and social assistance (13,000). Manufacturing lost 24,000 jobs in August.
The soft employment data effectively cemented the Federal Reserve’s plans to cut interest rates at the September Federal Open Market Committee (FOMC) policy meeting. According to the CME FedWatch Tool, traders expect a quarter-point rate cut.
US Treasury yields were mostly drowning in a sea of red ink, with the benchmark ten-year yield shedding 1.4 basis points to 3.719%. The two-year fell 6.4 basis points to 3.688%, while the 30-year bond was little changed at 4.015%.
Meanwhile, north of the border, Canada recorded a disappointing jobs report. According to Statistics Canada, the Canadian economy added 22,100 jobs, falling short of the consensus estimate of 25,000. The unemployment rate rose to 6.6%, the highest level outside of the coronavirus pandemic since 2017.
The USD/CAD currency pair jumped 0.51% to 1.3572, from an opening of 1.3506, at 16:35 GMT on Friday. The EUR/USD fell 0.32% to 1.1077, from an opening of 1.1113.
The US Dollar Index (DXY), a measurement of the buck against a basket of currencies, picked up 0.16% to 101.27, from an opening of 101.11. The index is on track for a weekly loss of 0.42%, though the solid performance has allowed the DXY to erase its year-to-date decline.