Most of the recent evidence about the US economy point to a good Non-Farm Payrolls number on Friday – a big gain in jobs that could boost the US dollar, but this heavily depends on the atmosphere before the release. NFP Preview.
The most important figure towards the NFP on December 3rd comes from the weekly unemployment claims – they took a dive to 407K last week, the lowest level since July 2008. Jobless claims ranged between 430K to 500K in recent months. Similar to ranges in prices, this figure finally broke out of range, and did it big time. The reason I think it wasn’t a one time event is that the figures in the weeks before this drop went in the same direction as well. The moving average was dropping to significantly lower levels.
The fresh report on jobless claims showed a jump to 436K, higher than expected. While disappointing, it still sets the moving average at 431K, lower than beforehand.
More good figures were seen recently – consumer confidence jumped from 48.9 to 54.1 points, exceeding expectations. The private sector ADP Non-Farm Employment Change also exceeded expectations, showing a gain of 70K, nearly double the expectations.
Expectations for the NFP are for a gain of 150K, but even 200K won’t be a huge surprise. Both numbers are good. A gain of under 100K will be a big disappointment. Above 250K will be a good surprise.
Regarding the unemployment rate, it’s expected to remain unchanged at 9.6%. This figure won’t shake the markets unless it jumps to 10% or falls to 9.2%. Otherwise, the focus will remain on the NFP.
Market reaction
If the current, semi-optimistic mood about Europe will remain, a good Non-Farm Payrolls will boost the dollar and a bad number will hurt it. This is normal behavior that might be returning to the markets.
But if Jean-Claude Trichet or European politicians won’t supply the needed optimism and the market will bounce back to “doom and gloom”, the reaction will be the total opposite – a good Non-Farm Payrolls will give some optimism and trigger risk appetite – money will flow away from the “safe” dollar into risky currencies such as the Euro. And a bad number will just add dampen the mood even more, triggering more risk aversive trading – boosting the dollar. Absurd? Yes. But we’ve seen it before.
Anyway, it’s important to remember that the monthly NFP is a special release that has special characteristics. Please read the 5 notes for Non-Farm Payrolls Trading.
What do think the figure will be?
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