What to expect from the Non-farm Payrolls
Nonfarm Payrolls measures the change in the number of people employed during the previous month, excluding the farming industry. There's no suprise these numbers are an important gauge to economic growth as it directly links to consumer spending and the consumption factor in GDP. In this article I'll be discussing some a fundamental perspective of the numbers.
Let's start off with the LogicStrategy™ fundamental quantitative scores.
Throughout the past week towards the end of April USD was sitting at a slightly strong score of +8, however since then coming into May it has started to ramp up gaining a few points. Overall, showing expansive economic data in the US. If the US is growing then very likely we'll see strong numbers from the NFP which may turn out positive for the US dollar.
U.S. Initial Jobless Claims
Initial Jobless Claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. If we take a look at historic data we can see a trend of increasing numbers being negative for the economy and decreasing numbers being good as that means less people are worried about their employment status.
As we can see since the 2008 financial crisis the jobless claims increased significantly, however, since 2010 there's been a huge downtrend showing a strong workforce in the US. Overall, suggesting that there's no real worries towards employment in the current situation.
CB Consumer Confidence
Conference Board (CB) Consumer Confidence measures the level of consumer confidence in economic activity. To put it simply, weak consumer confidence suggests people don't have disposal income to spend and are worried their jobs are going to lay them off or the economic outlook looks slim. Whereas, a strong consumer confidence is the direct opposite and they're looking optimistic about the future, stable jobs, and looking to spend more disposable income in the economy.
Looking at the current scores we can see that previously the Consumer confidence was dropping last month sitting at 124.1, however economists forecast the consumers confidence to grow to 126.01, it has since exceeded expectations showing much greater confidence in the economy at 129.2. Overall, this could suggest that people are enjoying their jobs and feel confident they won't be sacked leading to further consumption in the economy, further supporting greater or neutral NFP growth numbers.
Pending Home sales
The National Association of Realtors (NAR) Pending Home Sales Report measures the change in the number of homes under contract to be sold but still awaiting the closing transaction, excluding new construction.
As a major indicator towards future investment and banking health there's no suprise that we're adding in pending home sales to our NFP analysis. If people are purchasing houses, then they're obviously confident their jobs can provide to pay for mortgage repayments. On top of this, any increase in the numbers will have a knock on employment effect to other sectors such as in the Property development sector, production and construction.
Taking a look at the numbers we can see that since March the numbers were decreasing which were negative for the economy. It has since picked up heavily exceeding expectations again by nearly 3% which is a huge jump. Positive numbers could mean positive employment and thus greater than expected numbers for the NFP.
U.S. Challenger Job Cuts
Challenger Job Cuts, released by Challenger, Grey & Christmas monthly, provides information on the number of announced corporate layoffs by industry and region. The report is an indicator used by investors to determine the strength of the labor market.
The most recent report suggested a significant drop in job cuts. Since march it has dropped significantly showing an overall downtrend in unemployment.
As we can see from the data the last 3 months suggests greater employment levels as less people are being fired. This may be because businesses require more employees now due to more demand on products, more employees required for the demand in the housing sector and overall a stronger US economy. Again another labor statistic in favour of the NFP being a neutral/ positive outcome.
Overall, the data suggests that the NFP is not a worry for the US economy as the most recent data over the past month has been positive. Remember that trading NFP is very high risk due to volatility and it can still have uncertain outcomes. Even though the data suggests a positive outcome it doesn't fully encapsulate facts but gives us retail traders a certain degree of certainty.