Cryptocurrency Prices Rise After Weak U.S. Employment Report

by Giorgi Kostiuk

2 years ago

U.S. Employment Data
Market Reaction
Impact on Cryptocurrencies

Cryptocurrency prices rose after the publication of another weak U.S. nonfarm payroll report. Bitcoin and Ethereum showed positive gains following the employment data for August.

U.S. Employment Data

In the latest report, the Bureau of Labor Statistics showed that the economy added 142k jobs in August, lower than the median estimate of 164k. The bureau also revised the July figure from 114k to 86k. On September 5, a report by ADP showed that the private sector created just 99,000 jobs in August. The unemployment rate slipped to 4.2% from the previous 4.3%, while average hourly earnings rose by 3.8%. Reports also show that the manufacturing sector continues to struggle, remaining in contraction mode.

Unemployment data finalized! JOLTS Job Openings – worst in 3 years. ADP Non-Farm Employment Change – worst in 3 years. Non-Farm Employment Change – 2nd worst in 3 years (last month was worse).Michaël van de Poppe

Market Reaction

Weak employment data suggest potential changes in Federal Reserve monetary policy, which may lead to an interest rate cut at the meeting on September 18. The rate may be cut by a substantial 0.50%, which explains the drop in government bond yields. The 10-year yield fell to 3.75%, while the 30-year dropped to 3.9%.

Impact on Cryptocurrencies

Historically, cryptocurrencies and other risky assets perform well when the Federal Reserve is cutting interest rates. For instance, in 2018, when rates were increased from 1.25% in March to 2.50% in December, Bitcoin fell by over 84%. In 2019, Bitcoin rebounded by over 350% after rates were cut by 0.75%. A similar trend occurred in 2020 amid the pandemic when rates were cut to zero. However, there is a risk that Bitcoin and other cryptocurrencies could retreat since the rate cut has already been priced in by market participants.

In conclusion, the current weak employment data may influence future Federal Reserve monetary policy, which in turn could significantly impact cryptocurrencies and other risky assets.

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