January U.S. Non-farm payrolls: 3 factors to consider


Active Trader
Jan 12, 2010
Market Focus for 5 FEB 2010: U.S. Non-farm Payrolls

3 factors to consider:

1) Non-farm payrolls - Median forecast: +15,000 - Range: -97,000 to +100,000
2) Unemployment rate - Median forecast: 10.0% - Range: 9.8% to 10.2%
3) Revision to past NFP data

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The U.S. January employment report will be released on Friday 5th February at 13:30GMT and traders will have their full attention on this number after the month of December showed a disappointing decline of 85,000 jobs, the negative impact of the fall was lessened somewhat by the upwards revision of the November figure (from –11,000 to +4,000).

Cautious optimism over the U.S. economic recovery has led economists to predict a return to growth in the headline figure for the first time since the series of negative numbers started in early 2008, however, the wide range of the analysts’ forecasts makes the January number much more likely to move the markets.

There will be 3 factors that traders will have to focus on and they will be the non-farm payroll (NFP) figure, the unemployment rate and what revision will be made to past NFP data (including December’s –85,000 number). The latest employment-related data released this week has been mixed to slightly bearish, with jobs in the private sector (ADP report) falling by less than expected while weekly jobless claims rose to 480,000 from 472,000, compared to the market’s forecast of a decline to 455,000.

Hence, the bias will be skewed more to the downside and any negative number (20,000 or more jobs lost) would send the dollar falling sharply. In addition, the Bureau of Labor Statistics will revise past NFP data (this is carried out each year in February) and in the event much more jobs are added to the losses of the period from April 2008 to March 2009, this will also be detrimental to the latest rally seen in the greenback. Any change in the unemployment rate, currently sitting at 10% will also move the markets, with a dip below the 10% level being seen as a positive sign while anything above the revised 26-year high of 10.1% will be a bearish trigger.

The currency pair to trade upon the release of the data will be the dollar versus the yen (usd/jpy) with the greenback’s strength dependant on the perceived pace of the U.S. economic recovery while the Japanese yen will serve as the currency vehicle for investors to trade in regards to risk appetite (selling the yen on a strong jobs report) or risk aversion, as higher-yielding assets would be sold off and the yen will stand to gain across the board. Short-term traders will no doubt move other major currencies when the data comes out but the usd/jpy and eur/jpy charts should show the clearest picture of the employment report’s effect on the currency markets.


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