Non-Farm Payrolls Set to Dampen Optimism over the US Economic Recovery

The US dollar is seen to gain on diminished appetites for risk as jobs growth in the US likely decelerated markedly in November after Superstorm Sandy battered the economy after slamming the East Coast. Meanwhile, continued uncertainty over bipartisan negotiations to get the US’ fiscal condition in order continues to weigh on confidence as a gauge for consumer sentiment is estimated to have declined this month.

The US Labor Department is believed to report that while unemployment likely held steady at 7.9 percent, Non-Farm Payrolls gained only 89,000 in November, a sharp drop from the 171,000 count seen in October. Such figure would be the fewest number of jobs generated in five months, and economists blame the anticipated pull-back on the monster storm. Payroll growth averaged 170,000 per month over the last three months, but analysts say that Sandy put that out of range in the next few months. S

ome economists see even that number as too high. They point out that the storm was a negative for hiring as it disrupted commerce and activity in densely populated areas of New York and New Jersey. Indeed, various economic data released just this week point to a weakened labor market. On Wednesday, the ADP employment survey fell to a seven-month low in November. Yesterday, the Challenger Job Cuts rose by 34.4 percent year-on-year due to the effects of the Hostess Brands bankruptcy.

Although the markets are likely to take the figure in stride because the impacts of the storm should be temporary, the budget talks in Washington are another key factor weighing on payroll growth. Businesses had already been reluctant to spend and hire, fearful that the government could fail to avoid the $600 Billion in automatic tax hikes and government spending cuts set to take effect at the start of the year. A lack of progress is foreseen to hinder firms to step up their hiring plans.

Another factor deemed to weaken market sentiment today is the University of Michigan Preliminary Consumer Sentiment report for December. The index is estimated to edge lower from 82.7 points to 82.4 points this month, signifying that consumer confidence is taking a hit from the continue impasse over how to avert the fiscal cliff, which could tilt the US economy into recession. On a downbeat updates from the world’s largest economy, a short position is warranted for the AUD/USD trades today.

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