What’s happening: The US Bureau of Labor Statistics is scheduled to report its latest figures on non-farm payrolls at 8:30am ET today.
Why it matters: The non-farm payrolls (NFP) report, which is released on the first Friday of every month, is the market’s most anticipated economic data and receives significant investor attention. It has the power of influencing investor sentiment for days and can impact every major currency pair, equities and even policy decisions.
The latest NFP report would decide the fate of the US dollar and Wall Street, both of which have been highly volatile this week. The Federal Reserve’s next move will also depend on the strength of this report. As traders grapple with coronavirus fears, this month’s NFP report may cause stronger market reactions and higher volatility versus recent releases.
- The headline NFP figure is expected to show 175,000 jobs added in February, following an addition of 225,000 jobs in January.
- The unemployment rate is expected to remain unchanged at 3.6%.
What’s happened so far: With the spread of coronavirus in the US, the Federal Reserve announced an unscheduled 0.5% interest rate cut earlier this week. Although this was the biggest rate cut since the 2008 financial crisis, market participants are expecting the central bank to announce another reduction at its March meeting. The decision will be based on today’s NFP numbers.
US equities have been very volatile. On one hand, coronavirus is spreading rapidly beyond the Chinese borders and, on the other, the US has released mostly positive economic reports this week.
The non-farm payroll report, which shows additions or losses in employment and the unemployment rate, is a major indicator of the overall condition of the economy.
Certain leading indicators have historically signalled the direction of the NFP report. These include the ISM manufacturing and non-manufacturing PMIs, the ADP employment report and the report on initial jobless claims. Most of these indicators have been positive this month, resulting in high expectations for today’s NFP figures. The employment component of the ISM manufacturing PMI rose to 46.9, from last month’s 46.6, while that for the ISM non-manufacturing PMI increased to 55.6, from a reading of 53.1 last month.
Latest data on initial unemployment claims also showed a decline of 3,000 to 216,000. The only report that disappointed investors was the ADP employment report, with an addition of 183,000 private sector workers, down from the previous month’s reading of 209,000.
January’s jobs data showed a strong increase in payrolls, with unusually warm weather helping lift employment figures.
What to watch: The currency market is prone to strong volatility just before the NFP report is released, with speculators changing their strategies to make the most of attractive trading opportunities. The volatility typically continues for hours after the release of the report. This time, there could be more volatility, with the US stock indices recording huge losses in the previous session and the greenback falling overnight.
While expectations are high for the NFP report, it could reflect early signs of the coronavirus impact. Also, investors need to bear in mind that this report does not reflect the complete impact of the virus having spread in the US.