Tomorrow the US will release its much awaited non-farm payrolls report for March. Forex traders are eagerly awaiting this report in order to judge the health of the labor market. The NFP report is the biggest economic indicator out of the US released every month. During the first Friday of each month the Bureau of Labor Statistics, a department of the US Department of Labor which is responsible for the NFP reports, will release the NFP report for the previous month.
The Federal Reserve closely follows labor trends as the US central bank is evaluating when to increase interest rates. The US Dollar will move aggressively after the release of the NFP report as forex traders will adjust plenty of their positions as a result of the data which will be reported tomorrow. Another reason why the US Dollar will move heavily is due to the fact that many forex traders will get the data wrong and therefore stop loss orders will be triggered.
What is expected of tomorrow’s NFP report? Economists expect the NFP report to show the addition of 248,000 for March. This will be a decrease from the 295,000 jobs reported in February. The unemployment rate is expected to remain unchanged at 5.5%. Private sector payrolls are expected to increase by 240,000 in March which is less than the 288,000 reported in February. Forex traders should also be careful and add or subtract the two month revision into the released data tomorrow in order to get a better read.
What are the most important factors to watch out for? The above mentioned figures are called headline numbers, but professional traders will look at different data to judge the strength of the report. For example the household survey may give a much better employment level than the headline figures. For example last month the headline showed an increase of 295,000 jobs while the household survey showed the addition of only 96,000 jobs.
The labor force participation rate is another crucial fact to keep in mind. Over the past years this figure has contracted which does not suggest a strong labor market which is widely distributed. Possibly the most important factor to watch out for is average hourly earnings which has been the biggest negative in the past two years as those with a job are not earning more money which is a drag on confidence and impacts consumer spending in a negative way. Make sure you read tomorrow’s NFP report deeper than just the headline figure.