Breaking: US Nonfarm Payrolls surge 353,000 in January vs. 180,000 forecast


Nonfarm Payrolls (NFP) in the US rose by 353,000 in January, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 333,000 increase (revised from 216,000) recorded in December and surpassed the market expectation of 180,000 by a wide margin.

Follow our US NFP Live Coverage here

Other details of the report revealed that the Unemployment Rate held steady at 3.7% and wage inflation, as measured by the change in Average Hourly Earnings, edged up to 4.5% on a yearly basis, coming in much higher than the market expectation of 4.1%. Finally, the Labor Force Participation rate remained unchanged at 62.5%, while the U6 Underemployment Rate ticked up to 7.2%.

"The change in total nonfarm payroll employment for November was revised up by 9,000, from +173,000 to +182,000, and the change for December was revised up by 117,000, from +216,000 to +333,000," the BLS noted in its press release. "With these revisions, employment in November and December combined is 126,000 higher than previously reported."

Market reaction to Nonfarm Payrolls report

 The US Dollar gathered strength against its rivals with the immediate reaction. At the time of press, the US Dollar Index was up 0.55% on the day at 103.65.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   0.47% 0.42% 0.25% 0.30% 0.80% 0.75% 0.47%
EUR -0.52%   -0.11% -0.27% -0.22% 0.28% 0.23% -0.05%
GBP -0.46% 0.05%   -0.20% -0.08% 0.40% 0.28% 0.08%
CAD -0.27% 0.26% 0.15%   0.03% 0.52% 0.49% 0.19%
AUD -0.39% 0.14% 0.09% -0.12%   0.47% 0.37% 0.16%
JPY -0.87% -0.39% -0.45% -0.61% -0.57%   -0.11% -0.40%
NZD -0.76% -0.28% -0.34% -0.50% -0.46% 0.04%   -0.30%
CHF -0.55% -0.06% -0.12% -0.29% -0.24% 0.26% 0.22%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 


This section below was published as a preview of the January jobs report at 05:00 GMT.

  • US Nonfarm Payrolls are seen higher by 180K in January after December’s 216K jump.
  • The US jobs report will likely impact the market pricing of the dovish Fed pivot and the US Dollar direction.
  • The United States Bureau of Labor Statistics will publish the employment data at 13:30 GMT.

The highly-anticipated Nonfarm Payrolls (NFP) data from the United States (US) is due on Friday at 13:30 GMT. The US labor market report will be published by the Bureau of Labor Statistics (BLS) and is expected to have a significant influence on the US Dollar (USD) price direction.

What to expect in the next Nonfarm Payrolls report?

The Nonfarm Payrolls report is expected to show that the US economy added 180,000 jobs in the first month of 2024, down from a whopping 216,000 jobs created in December. The Unemployment Rate is seen ticking up from 3.7% in December to 3.8% in the reported period. A closely-watched measure of wage inflation, Average Hourly Earnings, is expected to rise 4.1% in the year through January, at the same pace as seen in December.

The US labor market data holds the key to gauging the timing and the pace of the US Federal Reserve (Fed) interest rate cut this year, especially after the US central bank pushed back expectations of a March rate cut following the conclusion of its two-day policy meeting on Wednesday.

The Fed left its benchmark interest rates unchanged at the 5.25% to 5.50% range for the fourth consecutive meeting on Wednesday, in line with the market expectations. The statement, however, was read as slightly hawkish, as it stated, "until it has increased confidence that inflation is moving sustainably toward 2 percent, the Committee does not anticipate it will be appropriate to lower the target range for the federal funds rate.”

During his post-policy meeting press conference, Fed Chair Jerome Powell said, "based on the meeting today, I would tell you that I don't think it is likely that the Committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that [lower interest rates], but that is to be seen.”

"It is probably not the most likely case, or what we would call the base case,” Powell added.

The probability of a March Fed rate fell steeply from about 50% at the start of the week to 35% after the Fed policy announcements, according to CME Group’s FedWatch Tool. Meanwhile, markets now see a 90% chance of the Fed lowering borrowing costs in May.

Previewing January’s jobs report, TD Securities (TDS) analysts said: “As it has become customary for Januarys, we look for a strong increase in payrolls at 230k next week.”

“The NFP's annual benchmark and the update to seasonal factors will also add a wrinkle to this report,” the TDS analysts added.

Meanwhile, private sector employment in the US rose by 107,000 in January, data published by Automatic Data Processing (ADP) showed on Wednesday, below the 145,000 anticipated increase.

How will US January Nonfarm Payrolls affect EUR/USD?

The Nonfarm Payrolls, a significant indicator of the US labor market, will be published at 13:30 GMT. EUR/USD gained more than 1% in December and touched its highest level since July at 1.1140 before staging a technical correction to begin 2024. Traders gear up for a big volatility spike on the US jobs report, which could offer a fresh directional impetus to the main currency pair.

An encouraging NFP headline print, above 200,000, combined with a surprise uptick in wage inflation, could add credence to the Fed’s hawkish rhetoric, providing legs to the renewed US Dollar upside while weighing on EUR/USD. Conversely, the USD could come under renewed selling pressure should the data disappoint and reinforce March Fed rate cut bets. Following the Fed’s pushback on early rate cuts, a USD sell-off on a disappointing NFP figure could likely be short-lived.

Dhwani Mehta, Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD jumped off critical support at the horizontal 100-day Simple Moving Average (SMA), then aligned at 1.0780. The rebound saw the pair break through the key 200-day SMA at 1.0840. Despite the sharp upswing, the 14-day Relative Strength Index (RSI) remains below the 50 level, warranting caution for buyers.”

On the upside, EUR/USD buyers need a daily closing above the 21-day SMA at 1.0891 to sustain the upside. The next relevant topside barrier is envisioned at the 50-day SMA near 1.0920, above which a test of the 1.0950 psychological level cannot be ruled out. Any retracement in the pair could retest the 200-day SMA resistance-turned-support. Meanwhile, 100-day SMA could be the last line of defense for buyers.”

Nonfarm Payrolls FAQs

What are Nonfarm Payrolls?

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.
A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.
The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

How does Nonfarm Payrolls affect the US Dollar?

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.
NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

How does Nonfarm Payrolls affect Gold?

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa.
Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.
Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components.
At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.
The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

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