U.S. Non-Farm Payrolls (NFP) release Friday 5thof October 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 September will be released locally on Friday the 5th of October 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 much higher than expected at 201K Non-Farm jobs against the 191K Non-Farm jobs expected.
*The Average hourly earnings (M/M) increased to 0.4% and the U.S Unemployment ratealso saw an increase to 3.9%.
What is forecast this time?
The U.S economy is currently in a steady uptrend, with the Dow Jones Industrial Average hitting a record high on Wednesday. The upward momentum that we have seen might come to halt as the U.S 10-year Government bond yield comes back into focus.
Looking at the U.S 10-year Government bond yield chart below we can see that the bond yield has been trending lower within a channel. It looks like the yield has broken out of this channel and might move higher.
- 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.
For me the U.S 10-year Government bond yield must move above the 3.5% mark to change my view on the U.S markets as the earnings outlook and growth potential for stocks going forward into 2019 still looks very positive.
Chart 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.
The number of new Non-Farm jobs are expected to decrease to 184K from the previous months 201K 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).
The Average hourly earnings (M/M) number is expected to decrease to 0.3% from 0.4% 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?
5th October 2018 at 2.30pm
May your trading day be profitable!