ForexSpace.com - Forex news just out reports how, according to the US Labor Department, Nonfarm payrolls saw a modest uptick by just 115,000 jobs in April, the smallest gain in six months, and considerably weaker than experts expected. Although the US jobless rate fell to 8.1 percent, from 8.2 percent a month earlier, data suggests this was mainly due to huge numbers of Americans no longer actively looking to participate the labour market. The data unquestionable demonstrates sluggish growth in the United States, and as much as unemployment can be viewed as a lagging indicator, after disappointing GDP last month, today’s Nonfarms perhaps should not come entirely as a surprise.

The slowdown will heighten concerns that high gas prices and faltering income growth are weighing on the broader economy. Certainly, forex traders and top forex brokers will be eying the jobless situation over the next six months in the run-up to when Americans head to the polls. Whilst sluggish job gains pose a threat to President Barack Obama's re-election hopes, (the US is headed for the highest unemployment rate faced by any president since World War II) the country’s economy must create some 125,000 jobs per month merely to keep pace with population growth.

However, economists surveyed by the Associated Press broadly agreed that hiring should be sufficient to push the joblessness rate below 8 percent by Election Day. The 32 economists surveyed by the AP see steady job gains averaging 177,000 a month for the rest of this year. That should be enough to lower the unemployment rate to 7.9 percent by November. Nigel Gault, an economist at Massachusetts-besed IHS Global Insight, insisted that hiring is in fact “coming back into line with what you would expect with sluggish growth."

Nonetheless, US stock market futures immediately turned negative on the back of the news: the Standard & Poor’s 500 Index declining 0.3 percent to 1,381.8 at 8:52 a.m. in New York. Against the CAD, the greenback rose to C$0.9906 immediately following the release of the employment figures from C$0.9889 right before the data, but then dipped back to C$0.9884.

Against the Japanese yen, the USD tumbled quickly from 80.20 just ahead the data to reach an intra−day low at 79.80. Meanwhile, as eurodollar slipped 0.2 percent and after the disappointing payrolls data, cable was seen testing a one-week low at 1.6155; at the time of writing, however, forex traders saw the pair tick up toward previous levels at 1.6190.

As much as the Nonfarm results confirm a slowing US recovery, the data also raises the possibility of further easing measures from the Federal Reserve to kick-start growth. “The labor market isn’t improving all that much,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. “Layoffs have slowed but hiring hasn’t really picked up. The next couple of months are going to be challenging. The Fed’s caution is well-placed.”

QE on the way

But some commentators have pointed out that, with revisions, the figure is more promising than it may at first appear. “115k plus 53k of revisions puts us in line with where we thought. #notthatbad” tweeted Pawel Morski (@PM) on hearing the news. Economists had predicted that 170k jobs would have been added to the economy for the month of April, a figure which brings the nation close to the “golden number” of 200k which would bring down the unemployment rate and make the prospect of QE easier to predict.

Kathleen Brooks, Head of Research at ForexSpace.com, said: “We know that the Fed is watching the unemployment rate closely and if this fails to fall in the coming months then it makes the prospect of QE more likely going forward. Thus, an NFP print today below 200k would keep the prospect of more QE squarely on the table.

“A weak NFP number”, on the other hand, “could cause the dollar to weaken in the medium-term as it would make more QE from the Fed more likely.”

Sarah Cox, Staff Writer

Additional reporting by Drew Hillier, Editor