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U.S. Non-Farm Payrolls 2 November 2018

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Barry Dumas
Non-Farm-Payrolls

U.S. Non-Farm Payrolls (NFP) release Friday 2ndof November 2018

Non-Farm Payrolls are usually reported on the first Friday of the month, whereby the number of additional jobs added from the previous month is released. The US Non-Farm Payroll number for the month of October will be released locally on Friday the 2ndof November at 14:30.

This is what you can expect for your trading day....

Why is the jobs number important?

The Non-Farm Payrolls report (NFP) is treated as an economic indicator for people employed during the previous month and the number being released will have a direct impact on the markets. In the United States consumer spending accounts for most of the economic activity and the Non-Farm Payrolls report represents 80% of the U.S workforce. Farmers are excluded from the employment figures due to the seasonality in farm jobs.

What happened previously?

The Non-Farm Payrolls numbercame out much lower than expected at 134KNon-Farm jobs against the 184K Non-Farm jobs expected.

*The Average hourly earnings (M/M) remained unchanged at 0.3% and the U.S Unemployment rate came in marginally lower at 3.7%.

What is forecast this time?

The upward momentum the U.S economy experienced has come to a halt as the U.S 10-year Government bond yield has been firmly pushed into the spotlight. The sell-off in the U.S markets were mainly due to the insuring trade war with China and with investors moving out of equities as a result and into bonds and safe havens.

Looking at the chart of the S&P500 we can see the clear sell-off in the index where it is currently finding support at the 2652 level. If this support level does not hold then we might see the index move lower still. With a higher than expected NFP jobs number we might see the index move higher from its lows.

Screenshot 2018-10-29 at 09.49.43

Source – Bloomberg

Looking at the U.S 10-year Government bond yield chart below we can see that the bond yield is still above the key level of 3%.

  • The 3% yield mark has been in focus over the last year as traditionally higher Bond Yields have seen equity markets move lower as clients sell their equities and move into fixed income products.

Screenshot 2018-10-29 at 10.02.04

Source – Bloomberg

The US Non-Farm Payroll data will be watched closely by market participants to see if the growth we have seen can continue into the next quarter.

Jobs number:

The number of new Non-Farm jobs are expected to increase to 193K from the previous months 134K Non-Farm jobs.

Take note a higher than expected jobs number should be taken as bullish for the Dollar (USD), while a lower than expected jobs number should be taken as bearish for the Dollar (USD).

Hourly earnings:

The Average hourly earnings (M/M) number is expected to decrease to 0.2% from 0.3% in the previous month - This is a key figure to watch and if this number disappoints, it will signal a weak wage inflation outlook in the US.

Take note a higher than expected earnings number should be taken as bullish for the Dollar (USD), while a lower than expected earnings number should be taken as bearish for the Dollar (USD).

U.S. Unemployment Rate

The U.S Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to remain unchanged from the previous month at 3.7% unemployment.

Take note a higher than expected rate should be taken as bearish for the Dollar (USD), while a lower than expected reading should be taken as bullish for the Dollar (USD).

What to trade internationally:

Major indices to look at will be the S&P 500, Wall Street 30

Major Forex pairs to look at will be EUR/USD, GBP/USD and USD/JPY

Commodity to look at will be Gold.

What to trade locally:

Index to look at will be the ALSI

Forex pair to look at will be the USD/ZAR

Rand Hedges (BTI, CFR) and Rand Sensitives (Banks and Insurers)

How to trade the Non-Farm Payroll (NFP) report: The Strategies

There are many ways to trade the Non-Farm Payroll (NFP) report and here are a few strategies traders look at:

  • The Early birds: traders who will take an early position before the jobs number is released in anticipation that the directional movement the event will cause will be in their favour.
  • The Scalpers: as the data is released these traders will scalp and try and capitalize on the volatility that is created by the data, positively or negatively.
  • The calm and calculated: as the market digests the results of the Non-Farm Payroll (NFP) report and after the volatility swings have occurred these traders will take a position on the markets momentum.

When and what time is the US NFP (Non-Farm Payroll) announced in South Africa?

2 November 2018 at 2.30pm

 

 

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