US economy sheds 95,000 jobs and causes further US Dollar weakness

A week of mixed economic data closed on Friday with UK industrial production figures for August up 0.3% on July and 4.2% compared to the previous year, while news during the US session on Friday revealed that the US economy shed 95,000 jobs in September, raising expectations that the US Federal Reserve will have to step in to boost the flagging US economy.

Every month the US Bureau of Labor surveys 140,000 firms, excluding the agricultural sector, to see how many more or fewer people are in employment. The resulting change in "Non-farm Payrolls" is an important indicator of how the economy is performing. Companies doing more business hire more staff; more staff means more consumers and more tax. Falling activity leads to lay-offs; job losses mean reduced consumption and falling tax revenues.

In the olden days, an increase in payrolls was good for the US Dollar on the basis that a strengthening US economy meant a stronger US Dollar. Over the last couple of years during the financial crisis the reverse was true. If the US economy weakens it was a symptom of weakness for the world however, now neither argument can now be relied upon as investors seem to swing from one argument to the other almost as often as they change their socks.

Friday's figure suggested a throw back to the "olden days" as a bad number was bad for the US Dollar. After three months of net job losses expectations were for a net increase however, 95,000 jobs disappeared in September and the US Dollar fell by a cent against Sterling and the Euro as it starts the week one cent weaker than before the payrolls figure came out.

Sports Day in Japan, Thanksgiving Day in Canada and Columbus Day in the United States set the scene for a slow start to the week.

A double dose of housing data kicks off the UK economic schedule, before all eyes then turn to Tuesday's inflation figures. On Wednesday, trade balance and quarterly unemployment data will be in the spotlight. Highlights from across the Atlantic include Tuesday's FOMC minutes, followed by Wednesday's trade balance data. CPI and RPI figures are out on Friday, along with influential opinion polls from Empire State manufacturing and the University of Michigan.