Disappointing Nonfarm Payroll (NFP) Puts QE3 Back On…



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  • Change in Manufacturing Payrolls: +12K v +15e
  • Birth-Death Adjustment: +204K v +206K prior.
  • US UNEMPLOYMENT RATE: 8.2% V 8.1%E. 
  • Prior Change in Nonfarm Payrolls revised lower from +115K to 77K
  • Prior Change in Private Payrolls revised lower from +130K to 87K.

What does this mean?

I think the bottomline is that QE3 is back on the table, and more QE (Quantitative Easing) means weaker US Dollar, so the long-term view of the USD should adjust lower.

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If you dig a little deeper into today’s number, you’ll see there is nothing positive about this release and almost impossible for any economists to put a positive spin on.  Here are some background information to consider, and in my Post FOMC Analysis for the FOMC Meeting in April, I’ve talked about that unless something “catastrophic” happens, QE3 is most likely off the table… Well, I think the Nonfarm Payroll today qualifies, especially when you consider the Prior Revision, which makes both April and May’s NFP at below 100K!  (Apr. 77K, May 69K).

Ben Bernanke in his own words said that 100K of NFP is acceptable, and now seeing the average NFP for the last 3 months is sitting at 88.6K, and the last 5 months at 147.2K, I believe it would be very possible that FOMC will try to boost the market by announcing some kind of measure to reduce employment at the end of Operation Twist, which is schedule to end by June.

Now the worst part of this release in my opinion, is not the uptick in Unemployment Rate, but the 204K of Birth-Death Adjustment… which essentially means that without the BDA, we are looking at a negative NFP release… and that’s a scary thought.

In conclusion, I believe the outlook for USD is likely to suffer and QE3 speculators will be back; however, market will be mixed when it comes to shorting the USD, seeing that the crisis in Europe is still not over, so I’d be very selective when selling USD (Hint: JPY, CAD, even CHF are looking good).




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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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  1. Dear Henry,

    I see that your meter shows that CAD is fairing pretty well and even here you mention it as one of the options to short US against, but why do you think USD/CAD has been so negative towards CAD for the past month? According to my daily charts USD/CAD has increased to almost 600 pips since the beginning of May, shouldn’t it be the other way around, or is it the best time to Sell?

    Thank you

    • I would sell it as we saw temporary divergence between fundamentals and risk sentiment last month is coming to a rude awakening. Now that US fundamentals have changed as the prospects of QE3 is alive, I believe CAD is likely to strengthen on further depreciation of USD.

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