It’s NFP week, you guys!
Will we see another upside surprise from Uncle Sam’s job market or will the report disappoint?
What happened before?
- Hiring increased by 467K vs. projected 110K gain in January 2022
- December 2021 NFP reading was upgraded from 199K to 510K
- January unemployment rate ticked higher from 3.9% to 4.0%
- Average hourly earnings rose 0.7% vs. 0.5% consensus
The January NFP release blew market expectations out of the water when the headline figure came out at 467K versus the projected 110K in hiring gains. To top it off, the previous month’s reading enjoyed an upgrade from 199K to 510K.
Underlying components of the report revealed that the labor force participation rate held steady at 62.2% while wages grew stronger than expected.
For many, this was pretty impressive, given how the U.S. economy was facing setbacks from the Omicron variant throughout the month.
USD Pairs 15-min Forex Charts
The Greenback was edging lower ahead of the actual release, as traders were probably getting ready to be disappointed.
However, the U.S. currency popped higher across the board when the numbers were printed, as Fed rate hike bets likely picked up on the strong jobs figure.
What’s expected this time?
- February NFP to show 400K gain in employment
- Jobless rate to improve from 4.0% to 3.9%
- Average hourly earnings to slow down to 0.5%
Market watchers aren’t setting the bar too high for the February jobs report, as estimates are for a 400K gain hiring. This should be enough to bring the unemployment rate down a notch to 3.9%.
Leading indicators are hinting at positive prospects, though, with the ISM surveys and the ADP figure projected to post strong results than last time.
The ADP non-farm employment report is eyeing a rebound of 378K after the earlier 301K decline. Meanwhile, the ISM manufacturing PMI is slated to rise from 57.6 to 58.0 and the services PMI is expected to climb from 59.9 to 60.9, both reflecting a faster pace of expansion.
If these releases meet or beat expectations, dollar traders could brace themselves for another upside NFP surprise. On the other hand, downbeat results could keep market participants wary of a slowdown in February hiring.
If you’re planning on trading this top-tier event, make sure you check out the average volatility of USD pairs as a guide in setting stops and targets.
But if you’re not comfortable with potential price spikes, it’s totally okay to sit on the sidelines and watch price action unfold.
