US Misses Expectations in August Jobs Report, Pushing Bitcoin to 3-Month High

The price of bitcoin rose 1.3% to a 3.5-month high over $50,000 on Friday after the U.S. Labor Department revealed it only added 235,000 jobs in August, far below the consensus estimate of a gain of 725,000 jobs.

The report may encourage the U.S. central bank’s stimulus program, known as “quantitative easing,” or QE, to persist longer than expected. Many cryptocurrency investors speculate that QE could weaken the dollar, pushing up the value of bitcoin, which has a capped supply. Bitcoin is also still seen on Wall Street as a speculative asset, and the bet is that more investors will be forced to seek such investments as QE suppresses returns in traditional bond markets.

Although one month’s data isn’t by itself predictive of the course of the economy, the report may reinforce the idea that macroeconomic uncertainty caused by the Delta variant of COVID-19 will cause the U.S. Federal Reserve to delay winding down its stimulus program of purchasing $120 billion a month in bonds.

Bitcoin and USD Weakness

Jobs reports have historically affected the dollar’s strength in foreign exchange markets, and bitcoin’s price increase after Federal Reserve Chairman Jerome Powell’s gloomy report at the Jackson Hole symposium late last month may point to bitcoin becoming more popular when the dollar recedes.

“What we are starting to see is U.S. interest going down, and USD weakness may be associated with crypto gains,” said economist Jens Nordvig, founder of research firm Exante Data.

Although historically crypto hasn’t been correlated with moves in USD, Nordvig added, and there have been times when bad U.S. economic news has tanked bitcoin, like in March 2020 when the digital asset swooned with traditional markets.

“We believe the crypto market could be vulnerable on a short-term basis to any risk-off reactions to the U.S. jobs report,” said Joel Kruger, market strategist at institutional crypto exchange LMAX Digital.

Attaching price movements of any asset to mainstream economic indicators has been much more difficult during the pandemic, Nordvig said.

“I think these correlations are just starting to kick in, but they are not strong yet,” Nordvig said. “I think they will get stronger and stronger, as institutions enter the market.”

Delta Variant Impact

Despite the lower-than-expected increase in U.S. jobs in August, the unemployment rate fell to 5.2% from 5.4% in July, according to the report. The U.S. is down 5.3 million jobs from its pre-pandemic levels in February 2020, and unemployment among Black Americans jumped from 8.2% to 8.8%. Meanwhile, labor force participation among Black Americans increased.

The government also revised the July jobs growth figure to 962,000, up by 24,000 jobs from the initially reported 943,000 jobs.

Major job losses occurred in the retail and restaurant industries, losing 29,000 and 42,000 jobs respectively. Zero jobs were added in leisure and hospitality. Professional and business services rose by 74,000, transportation and warehousing rose by 53,000, manufacturing rose by 37,000, entertainment rose by 36,000, and information technology rose by 17,000.

The labor force participation rate – the percentage of the American population that is either working or actively looking for work – was unchanged from the 61.7% recorded in July.

The employment-to-population ratio, which measures the number of people employed against the total working-age population, changed little month to month at 58.5% from 58.4% in July.