NFP Quick Analysis: Three reasons why the worst jobs report is even uglier, market implications

  • The crash in the participation rate shows that many more are out of the workforce.
  • The real unemployment rate is higher, at 22.8%. 
  • BLS admits underreporting which is worth another five percentage points. 

The worst Non-Farm Payrolls report in history – 20.5 jobs lost and an unemployment rate of 14.7% – is shocking but investors were already bracing for disaster. The lockdowns imposed to curb the spread of coronavirus have taken their toll. The headline figures are devastating, but other statistics already paint an even darker picture.

Follow Non-Farm Payrolls updates live

1) Crash in participation

The participation rate had already tumbled from 63.4% to 62.7% in March and has now extended its fall to 60.2%. That means that the calculation of the unemployment rate is skewed to the upside. When fewer of those out of work are counted as unemployed, the percentage is lower. 

Will they come back? That is an open question.

2) The real unemployment rate is higher

Better estimates include the U-6 or "real unemployment rate – which had already leaped to 8.7% in March and is now 22.8% – and the broadest measure, the employment to population ratio, which stood at 60% in March and is now only 51.3%

3) Underreporting 

Even when disregarding that U-6 "real unemployment rate, the Bureau of Labor Statistics which publishes the NFP has this to note, emphasis mine:

If the workers who were recorded as employed but absent from work due to "other reasons" (over  and above the number absent for other reasons in a typical April) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been almost 5 percentage points higher than reported

That means that the headline could have been 19.7% and not 14.7%. Taking the previous figures into account, things look dire.

Market implications

Traders had their tin hats on, bracing for horrible figures. The details are worse and imply the situation is far worse. Stocks may suffer from deteriorating prospects for the US and global economies. 

The safe-haven US dollar has room to rise – when the US coughs, the world catches a severe sickness. 

S&P 500: Five charts to explain the comeback and why coronavirus carnage may crash it again

More information: 

US jobs report post-release checklist – May 8th, 2020

NFP Actual, Consensus and Deviation Negative The "worst US job report ever" printed a headline 20.5M job loss. Even if better than the -22M expected, it is a dismal figure.
NFP Revisions Negative March job growth number was revised downwards, from -701K to -870K.
Unemployment rate Negative

U3 unemployment rate spiked from 4.4% to 14.7%, while U6 underemployment skyrocketed from 8.7% to 22.8%.

Labor Force Participation Rate Negative The share of people in the workforce plunged from 62.7% to 60.2%, way below expectations.
Average Hourly Earnings Positive The layoffs are mostly being on lower-income jobs, as average wages figures have climbed above the roof to 4.7% on the month and 7.9% in yearly terms.


Foreign exchange (forex) trading carries a high level of risk and may not be suitable for all investors. The risk grows as the leverage is higher.
investment objectives, risk appetite and the trader’ level of experience should be carefully weighed before entering the forex market. There is always a possibility of losing some or all of your initial investment / deposit, so you should not invest money which is which it can’t afford to lose. The high risk that is involved with currency trading must be known to you. Please ask for advice from an independent financial advisor before entering this market.

Any comments made on Forex Crunch or on other sites that have received permission to republish the content originating on Forex Crunch reflect the opinions of the individual authors and do not necessarily represent the opinions of any of Forex Crunch’s authorized authors. Forex Crunch has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: Omissions and errors may occur.
Any news, analysis, opinion, price quote or any other information contained on Forex Crunch and permitted re-published content should be taken as general market commentary. This is by no means investment advice. Forex Crunch will not accept liability for any damage, loss, including without limitation to, any profit loss, which may either arise directly or indirectly from use of such information.

Analysis feed

FXStreet Trading Signals now available!

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

Latest Analysis

Latest Forex Analysis

Editors’ Picks

AUD/USD battles 0.7700 amid covid, stimulus woes-led risk-aversion

AUD/USD holds the lower ground, testing the 0.7700 level amid broad risk-aversion that has triggered a bounce in the safe-haven US dollar. Uncertainty over the US stimulus, worries over new covid strain and lockdowns weigh on the risk appetite. 


GBP/USD pressured towards 1.3650 amid risk-off, ahead of UK jobs

GBP/USD remains depressed, heading towards 1.3650. The cable responds to the fresh risk-off mood after flashing a two-day losing streak. UK virus data suggests an improvement in covid conditions, Health Secretary Matt Hancock gives credits to activity restriction measures.


Gold: Bulls target daily extension

Gold is on the verge of an upside extension on a break of weekly resistance. XAU/USD is making progress with respect to the bullish market structure following a period of consolidation in recovery of the daily correction.

Gold news

Ripple is South Korea’s most popular cryptocurrency, but XRP price stays pressured

XRP/USD bounces off intraday low of 0.2647, stays below 21-day SMA for fifth day. As per the latest report from Messari, Bitcoin and Ripple are the most popular cryptocurrencies in South Korea.

Read more

US Dollar Index: A breach of 90.00 exposes 2021 lows at 89.20

The inability of USD-bulls to push further north of recent tops in the 91.00 region in past sessions prompted sellers to return to the markts and shifted the attention to the potential continuation of the downtrend.

US Dollar Index News

Forex Majors