U.S. Non-Farm Payrolls (NFP) release – Friday, 5 April 2019

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 March will be released locally on Friday the 5^th of April 2019 at 14:30 SAST.

What happened previously?

The Non-Farm Payrolls number came in as a shock and much lower than expected at 25K Non-Farm jobs against the 181K Non-Farm jobs forecast. The NFP number was also much lower than the ADP Non-farm Employment Change number.

The Average hourly earnings (M/M) did beat expectations coming in marginally higher at 0.4% over the expected 0.3% and the U.S Unemployment rate dropped to 3.8%.

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.

U.S ADP Non-Farm Employment change:

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

The change in private employment undershoots market estimates and came in at 129K from the expected forecast number of 183K for the month of March 2019. All eyes will look to tomorrows comprehensive Non-Farm Payrolls report (NFP), especially wage growth numbers.

What is forecast this time?

U.S Economic growth is still on everyone’s radar as we saw last week with the talks of pending recession as the U.S Treasury Yield curve inverted once more. The (QoQ) Gross Domestic Product (GDP) data released for Q4 showed a slight decline from the 2.4% expected growth to 2.2%. Markets did not react as most analysts expected economic growth would be muted.

What can be noticed from the chart below is that the growth path has been on a steady decline over the last couple of quarters.

Historical Gross Domestic Product (GDP) chart below:

 

Source – Trading Economics

This week’s Jobs numbers will be watched closely to give an indication if the growth in the U.S work force can continue as the previous 25K jobs number did not impress.

• This time around we might expect Analysts to start focussing on other factors in the Jobs market besides the actual NFP number and look to the Job participation rate which has been very low. The Average hourly earnings will be watched closely once more as the wage growth rate has been subdued.

With current Trade negotiations underway which are predicted to see the U.S-China Trade War come to an end has seen markets start to rally across the globe. An end to the tariff disputes might give the U.S economy that lift it has been longing for moving forward.

Jobs number:

The number of new Non-Farm jobs are expected to increase significantly to 175K from the previous months 25K Non-Farm jobs.

Hourly earnings:

The Average hourly earnings (M/M) number is expected to decrease to 0.3% from the previous months 0.4% - This is a key figure to watch and if this number disappoints, it will signal a weak wage inflation outlook in the US.

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 at 3.8% unemployed.

Looking at the chart of Wall Street 30

Renewed vigour has returned to Wall Street and we might be set for another week filled with upward momentum on the Indices. The Wall Street 30 is at a breakout point and if the Trade negotiations fundamentals pan out coupled with the technical setup the Dow might just push higher to resent highs.

Some technical and fundamental points to look out for:

• The price action is still well above its major moving averages which supports the move higher moving forward.
• Ascending Triangle pattern forming on the wall Street 30 which might support a breakout from the 26298-resistance level.
• The price action is currently testing a major technical resistance level at 26298 and if this level does not hold we might see a push higher to 26824.

Looking closer to the jobs number we might see the price action move lower before we see the price action move higher as seen in Point2. Looking to Point 1 we might see the Technical pattern playout and the price action move higher to 26824.

• 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.

Source – Bloomberg

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 markets momentum.

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

5^th of April 2019 at 15.30 SAST.

May your trading day be profitable!