UBS On-Air: Paul Donovan Daily Audio 'Still not hiring'
At a Glance
Lead — Paul Donovan from UBS highlights the deteriorating quality of US employment data, specifically the recent September report, which indicates an increase in unemployment alongside higher participation from job seekers. The desk interprets this as indicative of a cautious labor market where the narrative of 'no hiring, no firing' holds, supporting stable consumer spending. Per the full note, the data's reliability is compromised due to lower response rates and seasonal adjustments, which may distort actual trends. Traders should keep an eye on how these employment figures play into broader consumption trends in the U.S.
Key Takeaways
- 01US employment data quality is declining, affecting market confidence
- 02Rising unemployment among younger cohorts hints at cautious hiring
- 03Stable middle-aged employment suggests sustained consumer spending
- 04Labor market dynamics will influence FX market trends
Full Analysis
What the desk is arguing
The desk posits that the increase in the unemployment rate to its highest level since 2021 signals a cautious approach in the U.S. labor market, despite an uptick in consumer participation. Per the commentary from UBS, while total payrolls exceeded expectations, the nuances in demographic unemployment rates, especially among younger job seekers, paint a complex picture of labor dynamics.
Supporting this view is the indication that while unemployment rose, the middle-aged demographic saw a decline in joblessness, suggesting sustained consumer confidence in spending. The commentary points out that as long as middle-class consumers remain employed, overall consumption is likely to hold steady, even in the face of rising unemployment among younger cohorts.
Where it sits in our coverage
Our consensus target for USD weakened slightly, with a range of 1.04 to 1.12 against major currencies, influenced significantly by labor market dynamics. Specific targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger dollar outlook based on stable consumer spending, while it diverges from bofa, which expects downward pressure on the dollar given current economic indicators.
How other firms see it
In general, firms like jpmorgan believe that the stable employment of middle-aged workers supports current spending levels, maintaining a bullish view on USD strength. In contrast, bofa suggests that the unemployment uptick among younger workers may dampen overall economic momentum.
In addition to these employment metrics, watch for indicators like U.S. Retail Sales and consumer sentiment surveys that could provide further insights into spending behaviors and trends impacting FX markets.
Market Implications
Traders should monitor how the employment data affects USD performance, particularly around the 1.10 level as a crucial pivot point. Upcoming retail sales figures could also provide context for consumption trends and, subsequently, impact FX positioning.
From the original
The September US employment report was finally released. This data’s quality has deteriorated dramatically—not because of the shutdown, but because survey response rates have been weak for some time, and the seasonal adjustment process in September has been a distortion in recent
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