BS: Dollar Erases Advance as U.S. Employment Gains Trail Forecast
The dollar erased gains after U.S. employers added fewer workers than anticipated in July even as the jobless rate dropped to 7.4 percent, indicating uneven progress in the labor market.
The 162,000 increase in payrolls last month was the smallest in four months and followed a revised 188,000 rise in June that was less than initially estimated, Labor Department figures showed in Washington. The Bloomberg U.S. Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.9 percent yesterday after U.S. initial jobless claims fell to a five-year low. The Federal Reserve said this week it will maintain its $85 billion of monthly bond purchases to spur growth, a move that also tends to debase the currency.
“If we start to see a slowdown in labor markets, that’s only going to lead markets to think the Fed’s not going to be tapering,” Sireen Harajli, a foreign-exchange strategist at Mizuho Bank in New York, said in a telephone interview. “The number was weaker than expected.”
The Bloomberg U.S. Dollar Index dropped 0.4 percent to 1,030.20 at 8:45 a.m. in New York after earlier gaining 0.3 percent.
The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 jobs gain. Workers spent fewer hours on the job and hourly earnings fell for the first time since October. The unemployment rate was forecast to drop to 7.5 percent from 7.6 percent, according to the Bloomberg survey median.
Fed Buying
The index rose yesterday as data also showed manufacturing expanded faster than analysts estimated.
“A below-forecast number should see the dollar surrender some of the growth it saw Thursday,” Joe Manimbo, a market analyst in Washington at Western Union Business Solutions, a unit of Western Union Co., said before the report. “That’s because that will tend to subtract from the case for a September taper from the Fed.”
Fed Chairman Ben S. Bernanke said June 19 after the Fed’s policy meeting that the central bank may start dialing back its bond-buying program this year and end it entirely in mid-2014 if the economy achieves sustainable growth. The Fed has been buying $40 billion of mortgage bonds and $45 billion of Treasuries to inject cash into the economy.
The economy has added an average of 201,000 jobs each month this year through June, Labor Department data show. Payrolls expanded in 2011 and 2012 by an average of 179,000 positions a month, the data show.
Inflation Outlook
A Federal Open Market Committee report on July 31 left the monthly pace of bond purchases unchanged, while saying in a statement “the committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.”
Bernanke is expanding the Fed’s balance sheet toward $4 trillion as he seeks to reduce a jobless rate after four years of economic growth. The Fed’s open-ended purchases were started last September and expanded in December. In two previous rounds, it specified total purchases in advance.
The Fed plans to hold its target interest rate near zero at least as long as unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent. Asset purchases may continue in 2014 until unemployment declines to about 7 percent, Bernanke said in June.
To contact the reporters on this story: Jeff Marshall in New York at jmarshall75@bloomberg.net; John Detrixhe in New York at jdetrixhe1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
