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U.S. Non-Farm Payrolls (NFP) release – 1 November 2019

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Barry Dumas
US-NON-FARM-PAYROLLS-NFP-TECHNICAL-TRADE-NOTE-1

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 will be released locally on Friday the 1st of November 2019 at 14:30 SAST.

Market outlook

The overall U.S economy is growing at a moderate pace as confirmed by Fed chair Powell at the interest rate decision press conference. Interest rates were lowered by 25 basis points for the third time this year by the FOMC on Wednesday. "We believe that monetary policy is in a good place," - Fed Chair Jerome Powell

With the Fed indicating that it may hit the pause button for further rate cuts this year the S&P 500 rallied back to all-time highs with the Dollar giving back gains from earlier the day. 

Events leading up to the Jobs report on Friday are:

U.S. ADP Non-Farm Employment change

The U.S. ADP Non-farm Employment Change is an excellent predictor of the Non-Farm Payrolls report as the ADP Non-Farm Employment Change measures the monthly change in non-farm, private employment.

The U.S. ADP Non-farm Employment Change is released two days ahead of the NFP jobs number. The ADP number was released on Wednesday at 14:15 SAST.

The change in private employment surprised and came in slightly higher at 125K from the expected forecast number of 120K.

Non-Farm Payrolls (NFP) outlook

The labour force growth in the U.S has been slow but stable this year, which was expected after the strong jobs numbers we saw in 2018. Job gains are well above the 109,000 or so that the Atlanta Fed estimates are necessary to keep the unemployment rate at the 50-year low of 3.5% - CNBC

We might see a slight increase in the Non-Farm Payrolls (NFP) number this Friday but not widely expected to shoot the lights out if the ADP Non-Farm Employment change is anything to go by.

Jobs number:

  • The number of new Non-Farm jobs is expected to decrease significantly to 85K from the previous month's less than enthusiastic 136K Non-Farm jobs.

Hourly earnings:

  • The Average hourly earnings (M/M) number is expected to increase to 0.3% from the previous month and the Average hourly earnings (Y/Y) is expected to increase slightly to 3.0%
  • This is a crucial figure to watch, and if this number disappoints, it will signal a weak wage inflation outlook in the U.S. Take note that the Average hourly earnings will be watched closely once more as the wage growth rate has been subdued.

U.S. Unemployment Rate:

  • The U.S. Unemployment Rate measures the percentage of the total workforce that is unemployed and actively seeking employment during the previous month. The U.S. Unemployment Rate is expected to tick up slightly to 3.6% unemployed.

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.

Technical Analysis outlook on U.S. Indices for the U.S Non-Farm Payrolls (NFP)

Wall Street 30

The Wall Street 30 has been lagging the other major U.S indices in reaching all-time highs but the price action is no firmly above the 27000 level. The markets rallied yesterday after the Fed interest rate decision which saw the S&P 500 at all time highs. We might see the Dow push higher to a target level of 27439 if we see a beat in the Jobs number on Friday.

Technical points to look out for on Wall Street 30:

  • The price action has stayed above the 27000 psychological level which is no acting as a major support level to be aware of.
  • The Relative Strength Index (RSI) is pushing higher to the over bought levels which indicates the price action might have more room for gains.
  • The 50-day SMA is also pointing higher supporting the upward movement.

WSLM30 GT247 Bloomberg-2Source – Bloomberg

Take note: that the outlook and levels might change as this outlook is released before NFP and before the current days U.S Market open.

What to trade internationally:

  • Major indices to look at will be the S&P 500, Wall Street 30, Nasdaq 100
  • 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 digest the results of the Non-Farm Payroll (NFP) report and after the volatility swings have occurred, these traders will take a position on the momentum of the market.

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

1st of November 2019 at 14.30 SAST.

 


Disclaimer:

Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by Barry Dumas, Market Analyst at GT247 (Pty) Ltd t/a GT247.com (“GT247.com”) as general market commentary, and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. GT247.com does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information which we receive from third party data providers. You must rely solely upon your own judgment in all aspects of your trading decisions and all trades are made at your own risk. GT247.com and any of its employees will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.

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