The US reported an increase of 155,000 jobs in November, significantly below expectations. Negative net revisions worth 12K were not helpful. Another downer was the slower wage growth in November: 0.2%. However, salaries are still up 3.1% YoY, within expectations and at absolute levels, an upbeat figure. Moreover, the Unemployment rate remained at the historical low of 3.7% with a stable participation rate of 62.9%.
DECEMBER US JOBS REPORT
US jobs report post-release checklist – December 7th, 2018
|NFP Actual, Consensus and Deviation||Negative||Missed with 155k..|
|NFP Revisions||Negative||Oct revised down to 237,000 from 250,000.|
|Unemployment Rate||Positive||Stable at 3.7%.|
|Labor Force Participation Rate||Positive||62.9%, same people are looking for a job.|
|Average Hourly Earnings||Positive||Same as expected, a +3.1%.|
For seemingly the first time in months, today's US jobs report had at least a little potential to influence the imminent Federal Reserve interest rate decision. Amidst a dramatically flattening yield curve, fears that the US-China trade truce could fall apart following the arrest of a prominent Chinese businesswoman, and a sharp drop in the stock market, Fed Fund futures traders were pricing in "just" a 72% chance of an interest rate hike in two weeks' time, according to the CME's FedWatch tool.
The 155k US November payroll gain after 12k in downward revisions was a disappointment, as was a down-tick in the workweek to 34.4 that left a 0.2% hours-worked drop, and weak figures for the construction sector. Yet the mix is typical of BLS survey week disruptions, as seen in September, and this month the week lined up with the California fires and cold stormy weather elsewhere.
US jobs report pre-release checklist – December 7th, 2018
|Previous Non-Farm Payrolls||Positive||Upward surprise from 190K expected to 250K.|
|Challenger Job Cuts||Positive||A lower reading in Nov, is a good omen for the job situation.|
|Initial Jobless Claims||Positive||
|Continuing Jobless Claims||Positive||A surprinsingly lower print has positive implications for consumer spending.|
|ISM Non-Manufacturing PMI||Negative||ISM’s employment sub-component decreased 1.3% from the Oct reading of 59.7%.|
|ISM Manufacturing PMI||Positive
||ISM’s employment sub-component increased 1.6% when compared to the October.|
|University of Michigan Consumer Confidence Index||Negative||A sligthly lower reading pinting to an exhausted economy.|
|Conference Board Consumer Confidence Index||Negative||Declined in Nov, following an improvement in Oct.|
|ADP Employment Report||Negative||A much lower print, albeit expected, is a bad omen for the NFP.|
|JOLTS Job Openings||Negative||Sligthly lower reading indicates companies posted less job openings.|
NOVEMBER US JOBS REPORT
The US Non-Farm Payrolls report for November beat expectations with a gain of 250,000 positions, well above averages of under 200,000 and early expectations. Net revisions were flat. Another piece of good news came from the participation rate. While the unemployment rate remained unchanged at 3.7%, participation moved up from 62.7% to 62.9%.
US jobs report post-release checklist – November 2nd, 2018
|NFP Actual, Consensus and Deviation||Positive||Upward surprise from 190K expected to 250K.|
|NFP Revisions||Negative||September revised down to 118K.|
|Unemployment Rate||Positive||Stable at 3.7%.|
|Labor Force Participation Rate||Positive||Up to 62.9%, same people are looking for a job.|
|Average Hourly Earnings||Positive||Same reading as expected but downward revised.|
Much like we saw with the Bank of England meeting getting overshadowed by Brexit developments earlier this week, traditional market-moving economic releases are taking a back seat to geopolitical developments in the US as well. Today's Non-Farm Payroll report, usually the marquee economic release of every month, has been partially overshadowed by news that President Trump asked his cabinet to draw up a possible trade deal with China.
We expect a 175k gain in nonfarm payroll employment in October as modest positive payback from Hurricane Florence is offset by weakness due to Hurricane Michael. While incoming employment data has remained strong, the timing of Hurricane Michael’s landfall, albeit in a less-populated region relative to Hurricane Irma in 2017, suggests that business disruptions and civilian evacuations may have depressed payroll numbers during the month. We expect a modest 0.17% m-o-m increase in average hourly earnings (AHE).
OCTOBER US JOBS REPORT
The US gained only 134,000 positions in September, significantly lower than official expectations that stood at 185,000 and below unofficial projections which were higher. Fingers are pointed to Florence. The BLS said that Hurricane Florence may have affected some industries. Everybody knows that the storm was not as harsh as Harvey or Irma last year, but for markets, it is good enough.
US jobs report post-release checklist – October 5th, 2018
|NFP Actual, Consensus and Deviation||Negative||Downward surprise from 185K expected to 134K.|
|NFP Revisions||Positive||Upward revision from 201K to 270K.|
|Unemployment Rate||Positive||Down from expectations and last release, now at 3.7%.|
|Labor Force Participation Rate||Neutral||Unchanged at 62.7%.|
|Average Hourly Earnings||Neutral||Same reading 0.3% and downward revised.|
As my colleague Fawad Razaqzada astutely highlighted in yesterday’s NFP Preview report, “wage growth has taken on increased importance than the actual jobs number given concerns about rising levels of inflation and in turn interest rates.” That dynamic is playing out in spades as traders digest today’s jobs report.
Payroll growth slowed to 134,000 in September, likely depressed in part by Hurricane Florence. Other labor market indicators, including a decline in unemployment and rising earnings, show no signs of cooling. Payroll growth disappointed in September with employers adding 134,000 jobs. That was likely depressed by Hurricane Florence hitting the Carolinas during the survey reference period. Relative to last year's storms, Florence hit a less populated area and also came at the tail end of the survey week, which meant many workers in its path were still able to clock in for part of the week and be counted as employed.
SEPTEMBER US JOBS REPORT
US wages rose 0.4% MoM in August, double the early expectations. The broader YoY measure shows an acceleration from 2.7% to 2.9%, also above initial projections. Higher salaries imply further consumption and the "right" kind of inflation, one that comes from increasing demand and nor from external factors such as rising oil prices or price hikes stemming from tariffs. Wages are correlated to core inflation.
US jobs report post-release checklist – September 7th, 2018
|NFP Actual, Consensus and Deviation||Positive||Upward surprise from 191K expected to 201K.|
|NFP Revisions||Negative||Revised down from 157k to 147k.|
|Unemployment Rate||Negative||Up from expectations but equal last release at 3.9%.|
|Labor Force Participation Rate||Negative||Less than expected at 62.7% vs. 63.0%.|
|Average Hourly Earnings||Positive||Big deviation upwards between expected 2.7% at 2.9% Actual.|
The buoyant and largely better than expected nonfarm payrolls gave a modest boost to the dollar with the greenback gaining about 50 points against the euro and 20 versus the yen in the first half hour after the release. Payrolls at 201,000 beat the consensus estimate by 10,000 but the equal downward revision to the July number left the two-month total flat. The headline U-3 unemployment rate, which only counts as unemployed those who have looked for work in the prior month was stable at 3.9%. The more realistic U-6 rate, charting those who have sought work in the past year, improved slightly to 7.4% from 7.5% in July.
In a world where financial media sensationalizes every US jobs report as “The Most Important Jobs Report Ever,” even the most bombastic personalities had to admit today’s release was relatively insignificant, at least as far as NonFarm Payroll reports go. After all, the US economy had shown job growth for 94 consecutive months heading into today, and the Federal Reserve has seemingly already decided to raise interest rates at its meeting later this month.
Well, today is your lucky day the FXStreet team has been working on a research material to make you an expert in trading the NFP report.
Considered the backbone of the U.S. economy, the NFP has
Since the headline number for NFP tends to move all financial markets, as a trader it is important that you prepare for various scenarios, by developing models to predict the likely headline number and to trade the outcome.
Ready to make a leap and become an NFP expert?
The Nonfarm Payrolls report: The most important economic indicator for the US
NonFarm Payrolls report measures the number of jobs added or lost in the US economy over the last month. It is released usually on the first Friday of each month, at 8:30 EST. It is published by the US Department of Labor.
This report is important because the US is the largest economy in the world and its currency (US Dollar) is the global reserve currency. The many economies peg (tie) their currency's value to the reserve currency, many commodities such as gold and oil are priced in terms of the reserve currency and the local economy's debt is priced in terms of its own currency.
The NFP report, because of its importance to the reserve currency, tends to move all markets: currencies, equities, treasuries, interest rates and also commodities. It does it so immediately after the release of the economic data and sometimes so dramatically.
US Departament of Labor
Those who advocate trading NFP releases base their advice on a previous preparation and some fundamental research. The elaboration of some macroeconomical analysis is essential for successful trading.
This research includes averages of past headline NFP numbers, Weekly Jobless Claims, ISM Industry Data reports or other employment reports as the ADP or the Challenger. Tracking these events is fundamental on the preparation of the trades to set up just after the release. You can check all this data on FXStreet Economic Calendar: ADP Report, Initial Jobless Claims, ISM Industry Data.
... Or Not to Trade
A lot more skeptical on the benefits of trading the event, as you can read in his article “Step aside the NonFarm Payrolls release”, Adrián Aquaro, President at Trader College, says its importance has decreased a little bit lately:
“Even if the impact has diminished gradually over time, still generates huge attention on the markets and it normally drives important monthly trends. Lately another event (the Fed Monetary Policy Meetings) has been driving similar attention, thanks mainly to the Interest Rates being at 0%.”
What is a NonFarm Payrolls Forecast?
A NonFarm Payrolls Forecast is some sentiment-based piece of content that tries to predict what the NFP numbers will be and what impact will they have on the markets. In this page, you'll find some articles and tools that will help you to understand which could be the outlook for ADP Report, Unemployment Rate, Average Hourly Earnings, Labor Force Participation Rate and some other important economic indicators.
The ADP (National Employment Report) is an estimation of nonfarm employment which is based on a survey of thousands of private sector businesses. One of the biggest differences between NFP data and ADP data is the sample and methodology of the study. ADP Jobs Report could show us an anticipation of the NFP's trends. Some outlooks are mainly based on the Jobs Report, in past data and in other related job indicators like Initial/Continuing Jobless Claims.