- US nonfarm payrolls are expected to rise by 160,000 in December after rising by 227,000 in November.
- The US Bureau of Labor Statistics will release employment data on Friday at 13:30 GMT.
- US employment data will shake the US dollar after the hawkish Fed minutes released on Wednesday.
The highly anticipated United States (US) Nonfarm Payrolls (NFP) data for December will be released by the Bureau of Labor Statistics (BLS) on Friday at 13:30 GMT.
The December jobs report is crucial to the next directional move of the US Dollar (USD) as it will help markets assess future interest rate cuts by the US Federal Reserve (Fed) amid the incoming administration of President-elect Donald Trump.
What to expect from the next Non-Farm Payrolls report?
Economists expect the Nonfarm Payrolls report to show that the U.S. economy added 160,000 jobs in December after seeing a dramatic gain of 227,000 jobs in November, as disruptions caused by two hurricanes and the Boeing strike ease. they vanished.
The unemployment rate (EU) is expected to remain at 4.2% in the same period.
Meanwhile, average hourly earnings (AHE), a closely watched measure of wage inflation, are expected to rise 4% year-on-year (YoY) in December, at the same pace as seen in November.
Investors will evaluate December employment data for new signs on the health of the US labor market, as they remain cautious about the outlook for inflation and monetary policy under a Trump presidency. Trump’s incoming immigration and trade policies are expected to stoke inflation, which would require higher interest rates.
Minutes from the Fed’s December meeting released Wednesday showed policymakers’ concerns about inflation and the potential impact of Trump’s policies, suggesting they will move more slowly and cautiously on rate cuts. of interest due to uncertainty.
Previewing the December jobs report, TD Securities analysts said: “We expect payrolls growth to cool closer to trend in December following October-November swings that were triggered by one-off shocks. “
“The unemployment rate is likely to have stabilized at 4.2% despite our expectation of a significant rebound in the household survey employment series. Separately, we expect wage growth to return to the average of 0.1% m/m after a series of high monthly impressions,” they added.
How will US December Non-Farm Payrolls affect EUR/USD?
Speculation surrounding Trump’s potential tariff plans continued to offset any impact from recent US economic data releases. However, that did not alter the market’s assessment of a no-rate decision at the meeting. Fed later this month, according to the CME Group’s FedWatch tool.
Earlier in the week, the BLS reported that JOLTS job openings rose to 8.09 million, beating forecasts for growth of 7.7 million and higher than October’s reading of 7.83 million.
Automatic Data Processing (ADP) announced Wednesday that U.S. private sector employment grew by 122,000 jobs last month, below the estimated 140,000 and a gain of 146,000 jobs in November.
ADP’s disappointing jobs report raised expectations for weak payrolls data on Friday. However, US ADP data is generally not correlated with official NFP data.
If the NFP headline figure shows payroll growth below 100,000, the US Dollar could see a massive sell-off in a knee-jerk reaction to the data as it would create a dilemma for the Fed and could reignite dovish Fed expectations. Fed. In such a scenario, EUR/USD could stage a solid recovery towards the 1.0450 level.
On the other hand, an upside surprise in the NFP and wage inflation data could double the Fed’s hawkish shift, sending the USD back to multi-year highs while knocking the EUR/USD pair to the lowest level in more than two years below 1.0250.
Dhwani Mehta, Lead Analyst for the Asian session at FXStreet, offers a brief technical outlook for EUR/USD:
“EUR/USD remains below all major daily SMAs ahead of the NFP showdown. Meanwhile, the 14-day Relative Strength Index (RSI) points south below the 50. These technical indicators suggest that the pair remains exposed to downside risks in the short term.”
“Buyers need a decisive break above the 21-day SMA at 1.0391 to initiate a significant recovery towards the Jan. 7 high of 1.0437. The next relevant upside target aligns with the 50 SMA. days at 1.0510. New buying opportunities will emerge above that level, calling for a test of the December 6 high of 1.0630. If EUR/USD gives up a sustained break of the two-year low at 1.0224, further declines will target the psychological barrier of 1.0150.”
economic indicator
Non-farm payrolls
The most important result contained in the employment report is the monthly change in non-farm payrolls published by the US Department of Labor. The report publishes job creation estimates for the previous month and revisions to the data for the previous two months. Monthly changes in payrolls can be very volatile and the publication of this report generates high volatility in the dollar. A result above the market consensus is bullish for the dollar, while a result below expectations is bearish.
Next post:
Fri Jan 10, 2025 1:30 p.m.
Frequency:
Monthly
Dear:
160K
Previous:
227K
Fountain:
US Bureau of Labor Statistics
The monthly US employment report is considered the most important economic indicator for currency traders. Published on the first Friday following the reported month, the change in the number of employees is closely related to the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers the evolution of the labor market when setting its policies, which affects currencies. Despite several leading indicators shaping estimates, Non-Farm Payrolls tend to surprise markets and trigger substantial volatility. Actual numbers that beat consensus tend to be bullish for the USD.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and, therefore, a key factor in the valuation of currencies. A high level of employment, or a low level of unemployment, has positive implications for consumer spending and therefore economic growth, boosting the value of the local currency. On the other hand, a very tight labor market – a situation in which there is a shortage of workers to fill vacant positions – can also have implications on inflation levels and, therefore, on monetary policy, since a supply of labor Low labor and high demand lead to higher wages.
The pace at which wages grow in an economy is key for policymakers. High wage growth means that households have more money to spend, which often translates into higher prices for consumer goods. Unlike more volatile sources of inflation, such as energy prices, wage growth is considered a key component of underlying and persistent inflation, as wage increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding their monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks have mandates explicitly related to the labor market beyond controlling inflation levels. The United States Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the only mandate of the European Central Bank (ECB) is to keep inflation under control. Even so, and despite the mandates they have, labor market conditions are an important factor for authorities given their importance as an indicator of the health of the economy and their direct relationship with inflation.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
