Revision of the US labor market data: Much ado about nothing? - Commerzbank

Why is our job as a currency analyst so exciting? The market often likes to focus on different events that it considers interesting and relevant for exchange rates. This is why otherwise boring facts such as statistical revisions, which are usually only of interest to those who are obsessed with detail and otherwise cannot draw anyone out from behind the stove, suddenly become the focus of everyone's attention and can even be market-moving. Like the revision of the US labor market data, which is on the agenda today and on everyone's lips, Commerzbank's FX Analyst Antje Praefcke notes.

US labor data may shake the market

"Once a year, the survey-based labor market data is revised. The reference month is always March. It is foreseeable that the payrolls data since summer last year up to March 2024 slightly overstated job creation. As our experts estimate, instead of an average of 246 thousand jobs, only 190 thousand new jobs could have been created per month, i.e. a total of around 700 thousand fewer jobs extrapolated to the year in question."

"This would be the biggest revision since 2009, i.e. since the financial crisis, which is why the market is focusing so much on it. So, if the revision shows that the labor market data had been overstated since last summer, the market could feel more confident in its assumption that the Fed will have to cut the key interest rate quickly and sharply, as the labor market has already cooled longer and more sharply than everyone had previously assumed."

"In the event of a significant downward revision, USD losses could be expected accordingly. But, we continue to expect that the US economy will avoid a recession and will 'only' expand more slowly than the long-term trend over the next few quarters. Of course, if the US growth advantage turns out not to be as strong and sustainable as previously thought, there are certainly reasons why the USD should no longer benefit as much from this advantage in the medium term or should lose part of it. But massive, panicked interest rate cuts and hasty dollar sales are unjustified."