NFP Quick Analysis: Good, but as good as it gets, re-closing is rapidly ravage reopening gains


  • The US economy gained 4.8 million jobs in June, better than expected. 
  • Data is from early June when the US economy was reopening at a rapid pace.
  • A raging second wave of coronavirus cases is set to hit employment, including in the long term.

"The US never got the virus under control before reopening" – said Dr. Anthony Fauci, and the results of this attempt to return to normal are impressive but probably as good as it gets. 

The US economy gained 4.8 million jobs in June, better than three million expected, and on top of 90,000 added in revisions to previous months. The Unemployment Rate fell to 11.1%. That came on top of an increase in the participation rate from 60.8% to 61.5%.

So far, everything looks upbeat. However, accounting for misclassification issues, the jobless rate would have been 12.1%. The U-6 "real unemployment rate" dropped to 18%, still an elevated level. 

The chart also provides a reminder that April saw a loss of around 20 million jobs, so the recent gains – around 7.3 million – compensate for only a third of positions lost.

Perhaps a better reflection of the US job market is the chart showing continuing jobless claims. The NFP overshadowed the most recent figures:

It gets worse when remembering that the NFP surveys were taken – on June 12, before the disease lifted its head again.

Coronavirus carnage

The US hit a record number of infections on Wednesday, around 50,000, while fatalities in Texas hit a six-week high. COVID-19 is spreading, especially in California, Arizona, Texas, and Florida – but also New York and New Jersey halted reopening plans. 

These are only the latest developments – but the consumer did not wait for orders to stay at home. Data from SafeGraph showed a decline in foot traffic in cities suffering a spike in cases in the third week of June – just after the Non-Farm Payrolls surveys were taken. Another firm, Commerce Signals, showed a decline in credit and debit card spending from the end of May in most states. A third form, Homebase, estimates that as many as 20% of small businesses will permanently close.

Overall, high-frequency data suggests the economic situation has already begun deteriorating during June. The Non-Farm Payrolls report si far from being outdated – it shows a high watermark for the economy after the first wave. That peak is far off the pre-pandemic levels and is where the downturn begins.

A "reverse square root" – a sharp fall, a sharp rise to a lower level, and then flat at best:

In trading terms, that is more like a dead cat bounce. 

Market reaction

June's Non-Farm Payrolls figures provide a view of "as good as it gets," like that film starring Jack Nicholson. Will stock markets react adversely? After staging a rally worth around 20% – the best since 1998 – there is a case for a downside correction. Are we now where we were in late February? Is it the complacency before the fall? 

Not necessarily. It is always essential to note the factors pushing up stocks – roughly $3 trillion of newly created money by the Federal Reserve and a lack of high-yielding alternatives. Americans now enjoy a long Independence Day weekend, allowing investors to digest everything. In the meantime, COVID-19 cases will likely continue rising. Will stocks suffer a day of reckoning on Monday? We will know soon enough. 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

GBP/USD holds above 1.30 as UK Q2 GDP falls 20.4%

GBP/USD is on the back foot, trading closer to 1.30 amid dollar strength. UK Q2 GDP fell by 20.4%, within expectations. The devastating drop was priced in by markets.

GBP/USD News

Gold completes $200 collapse, trades below $1,900

Gold remains under immense pressure, trading below $1,900 after the biggest rout in seven years. Profit-taking and higher US yields weigh on the precious metal. US inflation figures are eyed.

Gold News

EUR/USD pressured toward 1.17 amid higher US yields

EUR/USD is falling toward 1.17 as US bond yields rise amid the US fiscal impasse and ahead of US inflation figures. Coronavirus headlines and eurozone industrial output are also in play.

EUR/USD News

Forex Today: Gold sell-off extends, dollar reigns supreme amid fiscal impasse, ahead of data

US bond yields are on the rise, supporting the recovering dollar and contributing to a sell-off in precious metals. The lack of progress in US fiscal talks and the increase in America's coronavirus deaths are among the depressing factors. US CPI is eyed.

Read more

WTI: Big move looks overdue

WTI could soon witness a big move in either direction. That’s because, the spread between Bollinger bands – volatility indicators placed 2 standard deviations above and below the 20-day simple moving average of price - has narrowed ...

Oil News

Forex Majors

Cryptocurrencies

Signatures