Breaking: US Nonfarm Payrolls rise by 275,000 in February vs. 200,000 forecast


Nonfarm Payrolls (NFP) in the US rose by 275,000 in February, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading surpassed the market expectation for an increase of 200,000. On a negative note, the BLS revised January print of +353,000 lower to +229,000.

Other details of the report showed that the Unemployment Rate climbed to 3.9% from 3.7% in January while the Labor Force Participation Rate held steady at 62.5%. Wage inflation, as measured by the change in the Average Hourly Earnings, was up 4.3% on a yearly basis, below the market expectation and January's reading of 4.4%.

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"The change in total nonfarm payroll employment for December was revised down by 43,000, from +333,000 to +290,000, and the change for January was revised down by 124,000, from +353,000 to +229,000," the BLS noted in its press release. "With these revisions, employment in December and January combined is 167,000 lower than previously reported."

Market reaction to US Nonfarm Payrolls data

The US Dollar came under renewed selling pressure with the immediate reaction to the February jobs report. At the time of press, the US Dollar Index was trading at its lowest level since mid-January at 102.60, losing 0.18% on a daily basis.

US Dollar price today

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

  USD EUR GBP CAD AUD JPY NZD CHF
USD   -0.15% -0.52% -0.15% -0.53% -0.79% -0.52% -0.34%
EUR 0.15%   -0.39% 0.01% -0.45% -0.65% -0.38% -0.27%
GBP 0.53% 0.38%   0.38% 0.00% -0.26% 0.01% 0.18%
CAD 0.14% 0.00% -0.39%   -0.46% -0.66% -0.38% -0.27%
AUD 0.52% 0.45% 0.00% 0.45%   -0.20% 0.05% 0.19%
JPY 0.73% 0.60% 0.20% 0.59% 0.21%   0.23% 0.39%
NZD 0.52% 0.38% -0.01% 0.38% -0.07% -0.28%   0.12%
CHF 0.43% 0.27% -0.13% 0.26% -0.19% -0.40% -0.12%  

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 US February Nonfarm Payrolls data at 07:00 GMT.

  • US Nonfarm Payrolls are set to rise by 200K in February after January’s stellar 353K gain.
  • The United States Bureau of Labor Statistics will release the labor market data at 13:30 GMT.
  • Robust employment data could provide some relief to US Dollar buyers.

The all-important Nonfarm Payrolls (NFP) data from the United States (US) is slated for release on Friday at 13:30 GMT. The US labor market data, published by the Bureau of Labor Statistics (BLS), could significantly impact the market’s pricing of when the Federal Reserve (Fed) will start lowering interest rates, eventually influencing the US Dollar’s value.

What to expect in the next Nonfarm Payrolls report?

The Nonfarm Payrolls report is likely to show a jobs addition of 200,000 to the US economy last month, down from January’s whopping 353,000 job gain. The Unemployment Rate is expected to stay unchanged at 3.7% in the reported period. A closely watched measure of wage inflation, Average Hourly Earnings, is set to rise 4.4% in the year through February, a tad slower than the 4.5% increase registered in January.

Market participants will closely scrutinize the headline NFP print and the wage inflation data to determine the timing and the scope of the Fed interest rate cut this year, especially after Fed Chair Jerome Powell delivered less hawkish comments during his testimony on the semi-annual Monetary Policy Report (MPR) before the House Financial Services Committee on Wednesday.

Powell said that interest rate cuts are still likely in the coming months if Fed officials are more confident that there is further evidence of falling inflation. Markets are currently pricing in about a 75% chance that the Fed could begin lowering rates in June, higher than the 63% probability seen a day earlier, according to the CME Group’s FedWatch Tool.

Previewing February’s jobs report, TD Securities (TDS) analysts said: “We look for February payrolls to show some moderation in job gains after January's meaningful upside surprise.”

“The upshot is that we are looking for mixed signals from the February data, with a report that will likely point to a still-tight labor market that's yet to act as an obstacle for a normalization in wage growth,” the TDS analysts added.

Meanwhile, the US private sector added 140,000 jobs in February, an increase from the upwardly revised 111,000 increase in January while a tad below the expected 150,000 addition, ADP reported on Wednesday. The number of job openings on the last business day of January stood at 8.86 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS). The data also came in slightly below the market forecast of 8.9 million.

How will US February Nonfarm Payrolls affect EUR/USD?

Loosening US labor market conditions and Powell’s comments smashed the US Dollar to fresh one-month lows across its major counterparts, lifting the EUR/USD pair to a six-week high above 1.0900. Will the US jobs report help the EUR/USD gain further upside traction?

An encouraging NFP headline figure alongside hotter-than-expected wage inflation data could diminish bets for a June Fed rate cut, providing the much-needed relief to the US Dollar at the expense of the Euro. On the other hand, disappointing data could add to the downward pressure on the US Dollar while boosting EUR/USD.

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

“The EUR/USD pair broke through the critical 50-day Simple Moving Average (SMA) at 1.0857 on Wednesday, opening the door for further upside. The 14-day Relative Strength Index (RSI) sits just beneath the overbought territory, suggesting that there is more room for the upside.”

“Acceptance above the 1.1000 level is likely to refuel the rally toward the 1.1050 psychological level. EUR buyers will then aim for the December 2023 high of 1.1140. Conversely, the initial demand area is seen at the 1.0900 round figure, below which the 50-day SMA at 1.0856 will be tested. The next support is seen near 1.0835, where the 100- and 200-day SMAs hang around. Further south, the 21-day SMA at 1.0821 could come to the rescue of EUR/USD,” Dhwani adds.

Nonfarm Payrolls FAQs

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.

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.

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.

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.

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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