US Unemployment Jumps to 6.1% - Dollar Remains Firm

Last week was a key week in terms of economic indicators. We saw central bank interest rate announcements from the RBA, BOC, BOE and ECB and key employment data from the US.

All interest rate announcements came in as expected but US employment data managed to surprise to the downside. Non-Farm Payrolls fell more than expected (-84K) for August and the Unemployment Rate jumped from 5.7 to 6.1%. This represents the highest rate since September 2003.

Despite this negative US economic news the Dollar remained firm, supported by carry trade unwinding and a further fall in oil prices. NYMEX crude oil posted a weekly low through the $110 level at $105.13.

This Week
Early market focus will be centred on a rumoured announcement from US Treasury Secretary Paulson due on Sunday evening. It is expected that he will announce a plan for the US Government to take control of Fannie Mae and Freddie Mac for at least a year.

This week will also play host to a 3-day OPEC meeting that takes place in Vienna. Running from Monday through to Wednesday, the main body of the programme is scheduled for Tuesday. Traders will be watching for any unscheduled announcements made to the press throughout the 3 days.

Monday begins with an RBA testimony before the House of Representatives Standing Committee on Economics. Lead by Glenn Stevens, the RBA will testify on the latest semi-annual economic outlook.

At 09:30 the UK PPI Input number is due for release. The number is expected to fall by 1.2% after a -0.6% reading for July.

Later in the day we have a high volatility event from Canada. Building Permits will be released and further contraction is expected. July saw -5.3% and a further -1.0% is expected from August.

Tuesday will bring us more high volatility with Australian data first up. At 02:30 we will see both Home Loans and Retail Sales. Home Loans posted a -3.7% for July and a month-over-month 0.0% move is anticipated for the month of August. Retail sales, on the other hand, are expected to post a mild recovery. July figures were reported at -1.0% but numbers for August should show a 0.5% increase.

In the UK session traders will be focussed on Manufacturing Production. A number of -0.1% is anticipated after a -0.5% report in the previous month.

Further Canadian construction data is due on Tuesday at 13:15. It comes in the form of the Housing Starts report and is expected to show 194K new residential constructions getting underway. This would be an improvement from the 187K annualized reported in August.

The first high volatility economic indicator from the US is scheduled for release at 15:00 on Tuesday. Pending Home Sales MoM are likely to have fallen by 1.2% in August after a 5.3% increase in July.

On Wednesday we will see the first high volatility event from the Eurozone. ECB President Trichet will testify before the European Parliament Committee on Economic and Monetary Affairs in Brussels.

Towards the end of the day (22:00) we have the RBNZ Interest Rate Announcement. It is expected that the RBNZ will cut interest rates for the second time in 2 meetings to 7.75%. This will be an interesting event because the last cut (happened back on the 23rd of July) surprised most market participants.

Thursday is often the busiest day in terms of economic releases and this week is no exception. For the second time in 3 days Australia leads the field with two high volatility events at 02:30. This time Employment Change and Unemployment Rate are to be reported. Employment Change is expected to come in at 5.5K jobs created while Unemployment Rate could increase from 4.3% to 4.4%.

Thursday will also play host to the third central bank testimony of the week. The BOE MPC, including Mervyn King, will testify on the August 2008 Inflation Report before the UK Treasury Committee at 09:45.

At 13:30 we have a high volatility announcement from Canada and the US. Both countries will be reporting their latest Trade Balance figures. Canada is expected to report a surplus of $5.6B from $5.8B in the previous month while the US deficit is likely to increase to $58B from $56.8B previously reported.

Finally for Thursday we have Core Retail Sales and Retail Sales from New Zealand. Last month’s Core number came in flat at 0.0% while the raw number posted a 0.9% gain. This month data is expected at 0.2% and -0.3% for Core Retail Sales and Retail Sales respectively.

Friday will be dominated by high volatility data from the United States. At 13:30 we will see Core Retail Sales, Retail Sales and PPI (supported by our Visual Analysis tool). Core Retail Sales are expected to contract by 0.2% MoM while Retail Sales should be up by 0.2%. The Producer Price Index is expected at -0.5% after last month’s 1.2% gain.

At 14:55 we have the final high volatility announcement from the US and for the week in the shape of the preliminary University of Michigan Consumer Sentiment. Sentiment is expected to increase to 64 from last month’s revised figure of 63.

For full details of this week’s economic news and daily updates please see our economic calendar and economic speeches pages.