What’s happening: The US Bureau of Labor Statistics is scheduled to report its data on non-farm payrolls for the month of March at 8:30am ET today.
Why it matters: The US NFP (non-farm payrolls) report is the most anticipated economic report, as it is an important indicator of the economy’s health and prospects.
The release of this data is typically a market moving event and impacts global equity and forex markets. And, it influences overall market sentiment for days. Moreover, the report is the main indictor considered by the Federal Reserve for its monetary policy decisions.
However, with the coronavirus outbreak creating havoc, this time market reaction and the Fed’s response could be very different from the past.
What’s different this time: Coronavirus has begun hammering businesses, the economy and financial markets. The US Fed has already lowered interest rates to almost zero, disclosed an unlimited QE (Quantitative Easing) plan and announced various other measures to lift the economy. Yet, the figures disclosed in today’s NFP report will determine the Fed’s next moves. Depending on how bad the figures are, the government may feel compelled to take further action to support the economy.
This month’s jobs report is likely to trigger much stronger market reactions than it has done in the past. The US has already reported dismal jobless claims data, showing a massive spike in recent weeks.
Expectations: Here’s where the estimates stand ahead of the data release:
The headline NFP numbers are projected to show an additional loss of 100,000 jobs in March, following 273,000 job losses in February.
The unemployment rate is expected to rise to 3.8% in March, from February’s 3.5% increase.
There are certain leading indicators that have historically signalled the direction of the jobs report. These include the ISM manufacturing PMI, ADP employment report and initial jobless claims. Most of these indicators have been negative for March. Despite this, the jobs report may not be that bad for March, as data is collected only till March 12. This means the report will not show the worst of the coronavirus impact.
February’s jobs data had showed a strong rise in payrolls, with the economy adding the highest number of jobs that month since May 2018.
What to watch: The equity and currency markets are prone to large swings before and after the release of the NFP report. Volatility could be much higher this time. An indicator of this is the volatility witnessed in US stock indices yesterday after release of jobless claims data.
As the March report will not show the complete impact of coronavirus-led damage to the economy, investors are likely to keep an eye on news related to COVID-19 and its spread as well as any efforts by the government to lift the labour market.