NFP Preview, jobless claims do not give us a good signal

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Friday, 06 May 2022 Number of words: 443 Study time: 3 Minutes Views: 226


FED: The labor market "remains extremely tight."

Market analyst – IFC Markets

While we are getting close to the NFP report, looking at the latest published labor market data is not that too much bright. On the other hand, FED Chair Powell believes that it remains highly tight and improving despite all fears and concerns. 

Like every first Friday of the Month, the US Bureau of Labor Statistics (BLS) will be out to show the April jobs creation. Consensus expectations are for a 40K decrease from March numbers to a 391K rise in Nonfarm Payrolls in April. With newly created jobs, unemployment also is expected to ease to 3.5%, down from 3.6% in March, while Average Hourly Earnings, also with a slight decrease, are expected at 5.5% YoY. 

Expectations are for a 391K rise in Nonfarm Payrolls following the 431K increase in March. The unemployment rate is expected to have contracted to 3.5% from 3.6% in the previous month, while Average Hourly Earnings are expected at 5.5% YoY and 0.4% (MoM). 

If we see the same numbers as expectations, Mr. Powell's comment about the extremely tight labor market will be confirmed. However, if FED fails to control inflation, the labor market will also be hit by higher inflation and lower economic growth in the long term.

For this report, it is still too early to see the negative impact of economic growth, but with this backdrop, it will be likely to see that in the following months' reports. And next NFP report is scheduled before the next FOMC monetary policy meeting, which widely will be followed by members and affect the decisions.  

To review the other factors influencing employment, we have to remind the ISM Services PMI Employment that lately was down sharply to 49.5 from last month's 54.0 reading. Also, the ISM Manufacturing PMI Employment component came in at 50.9, showing a nearly 5% decline from last month at 56.3. And finally, ADP employment reported just 247K net new jobs, well below expectations and a notable drop from last month's upwardly-revised 479K reading. If you check the below figure of initial jobless claims, you can see the same decline in the past weeks as well.


NFP Preview


All mentioned data and numbers tell us that the labor market would be volatile and uncertain, which is not in favor of US stock markets but is supposed to be positive for the US dollar in the short term, as it will support the more tightening policies FED. NFP effects in the market will be limited this week, as it is after the FOMC meeting, and we already know that it can not affect in the short term as the decisions because they are already taken. 



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