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Australian dollar plummets on US employment data
Published on 10.03.2015 12:34

The Australian dollar is trading sharply lower today as strong employment numbers out of the US increased the pressure on the US Federal Reserve to hike interest rates

AT 2.52pm (GMT) the Aussie dollar was trading at US77.21c down from US78.01c in Fridays close.

Statistics from the US Labor Department late Friday showed that the US economy added 295,000 jobs in February, well above analysts’ expectations for a number of 235,000.

The unemployment rate fell to 5.5% compared to 5.7% in the previous month adding more strength to the overall job numbers.

The only downside in the report was the wage growth, with the average hourly wage rising just 3 cents to $24.78 an hour taking the yearly growth to around 2% and barely ahead of inflation.

Brushing of the growth in wages was Jim O'Sullivan, chief U.S. economist at High Frequency Economics who noted that it is only a matter of time before the falling unemployment rate give a boost to wage growth,

“Friday's figures provide more evidence that the labor market is recovering rapidly, with employment growth more than strong enough to keep the unemployment rate trending down” he said

, Falling unemployment "makes more acceleration in wages increasingly likely." he also added.

The 5.5% unemployment rate is quiet symbolic as this is the Feds target rate which signals a healthy economy,

"This is quite a symbolic change that increases the pressure on the Fed to hike rates in June," said Paul Dales, an economist at Capital Economics said.

 

Jim Paulsen, chief market strategist at Wells Capital Management, noted at the current pace, 5% unemployment is not out of the question which doesn’t go hand in hand with interest rates sitting near zero percent.

"I just can't imagine a Federal Reserve in this country arguing that we should have a zero interest rate structure when we have a sub-5 percent unemployment rate, or on the doorstep," Paulsen told CNBC.

 

 


Andrew Masters

Analyst

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