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U.S. Non-Farm Payrolls [NFP] release Friday 7th September 2018

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Barry Dumas
Non-Farm-Payrolls

U.S. Non-Farm Payrolls (NFP) release Friday 7 September

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 August will be released locally on Friday the 7th of September 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 number came out lower than expected at 157K Non-Farm jobs against the 193K Non-Farm jobs expected.

*The Average hourly earnings (M/M) remained unchanged at 0.3% and the U.S Unemployment rate was also unchanged from the market forecast of 3.9%

What is forecast this time?

The U.S economy is going from strength to strength and the recent U.S jobless claims are a good reflection of this. The amount of U.S citizens filing for unemployment benefits have fallen to a 49 year low. This is pointing to U.S labour market strength that should support economic growth moving forward.

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.

Looking at the chart below we can see a substantial increase in jobs during 2009 through to 2010 and from there on the job numbers have been constant within a sideways perimeter. 

Screen Shot 2018-09-07 at 08.27.49

Chart Source: Bloomberg

Jobs number:

The number of new Non-Farm jobs are expected to increase to 198K from the previous months 157K 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 decrease from the previous month to 3.8% 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?

7th September 2018 at 2.30pm

May your trading day be profitable!

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