U.S. Non-Farm Payrolls (NFP) release – Friday, 8 March 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 February will be released locally on Friday the 8^th of March 2019 at 15:30 SAST.

What happened previously?

The Non-Farm Payrolls number came in much higher than expected at 304K Non-Farm jobs against the 165K Non-Farm jobs expected. The NFP number was also higher than the ADP Non-farm Employment Change number.

The Average hourly earnings (M/M) did not impressed coming in much lower at 0.1% over the expected 0.3% and the U.S Unemployment rate rose to 4.0%.

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 came in slightly lower at 183K from the expected forecast number of 190K for the month of February 2019. All eyes will look to tomorrows comprehensive Non-Farm Payrolls report (NFP), especially wage growth numbers.

What is forecast this time?

The Gross Domestic Product (GDP) data released recently showed that the U.S economy did not slow down as much as what was expected, much to the surprise of analysts. It is expected that we might see yet another surprise in the Jobs number this time around. The US Non-Farm Payroll data will be used by market participants to see if the strong growth on the U.S Jobs front can continue to grow the economy.

• 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.

Jobs number:

The number of new Non-Farm jobs are expected to decrease to 181K from the previous months 304K Non-Farm jobs.

Hourly earnings:

The Average hourly earnings (M/M) number is expected to increase to 0.3% the previous months 0.1% - 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 decline from the previous month at 3.9% unemployment.

Looking at the chart of Wall Street 30

The current pullback from the 26298-resistance area has seen the Dow under pressure of late and if the Jobs number disappoint we might expect more downside on the cards.

Looking closer to tomorrows jobs number we might see the price action move higher back to the 26298-resistance level if the NFP number beats expectations as shown in Point 1. Looking to Point 2, if the number disappoints we might see the sell-off continue even lower to the 25422 or the 24831-support level which might bring the 200-day Simple Moving Average (SMA) (white dotted) into play.

• Take note that the outlook and levels might change as this outlook is released a day 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?

8^th of March 2019 at 15.30 SAST.

May your trading day be profitable!