We moving this site to another server, please ignore some errors until this is completed!US NFP Forecast: Nonfarm Payrolls set to increase by 190k in June, hourly earnings seen easing
- US Nonfarm Payrolls are expected to rise 190K in June, slowing from MayÂ’s 272K increase.
- The United States Bureau of Labor Statistics will release the Employment report at 12:30 GMT.
- The US Dollar awaits employment data after Fed Chair Jerome PowellÂ’s dovish remarks on Tuesday.
With US Federal Reserve (Fed) Chairman Jerome PowellÂ’s Sintra appearance out of the way, all eyes now remain on top-tier Nonfarm Payrolls (NFP) data for June, due on Friday at 12:30 GMT.
The Bureau of Labor Statistics (BLS) will release the US labor market data, which could offer cues on the timing of the FedÂ’s first interest-rate cut this year and the US DollarÂ’s (USD) next direction.
What to expect in the next Nonfarm Payrolls report?
The Nonfarm Payrolls report is set to show that the US economy created 190,000 jobs in June after having added 272,000 in May.
The Unemployment Rate will likely hold steady at 4.0% in the same period. Meanwhile, a closely-watched measure of wage inflation, Average Hourly Earnings, is seen increasing by 3.9% in the year through June following MayÂ’s growth of 4.1%.
Markets are set to analyze these key data sets closely, as they could provide a fresh guide to the possible timing of the FedÂ’s dovish pivot.
Markets scaled up their expectations for a Fed rate cut in September after TuesdayÂ’s Chairman Jerome PowellÂ’s commentary at the European Central Bank (ECB) Forum on Central Banking in Sintra.
Powell sounded quite optimistic about the recent encouraging inflation reports but said he needed more data before considering rate cuts. Markets perceived his acknowledgment of the progress in the disinflationary trend as dovish.
Meanwhile, the US private sector added 150,000 jobs in June, a modest decrease from the upwardly revised 157,000 figure in May, the ADP reported on Wednesday. The data missed the analystsÂ’ estimates of a 160,000 job addition. ItÂ’s worth mentioning that NFP has outperformed ADP in nine out of the past ten months.
Fed Chair PowellÂ’s dovish commentary, combined with weak US employment data, ramped up bets for a rate cut by the US central bank in September, with markets now seeing a 73% chance against a 64% probability seen early Tuesday.
Previewing the June employment situation report, BBH analysts said: “Bloomberg consensus is 190k vs. 272k in May, while its whisper number stands at 198k currently. For reference, the average gain over the past 12 months is 232k. The unemployment rate is expected to remain steady at 4.0% even as the participation rate is expected to rise a tick to 62.6%. With the labor market in better alignment, the pace of wage growth will be a bigger driver of Fed expectations. Average hourly earnings are forecast to rise 0.3% MoM, with the YoY rate expected to fall two ticks to 3.9.”
How will US June Nonfarm Payrolls affect EUR/USD?
The return of the doves smashed the US Dollar across the board alongside the US Treasury bond yields, driving the EUR/USD pair briefly above the 1.0800 threshold. Attention now turns to the US NFP report to affirm the loosening labor market conditions and the disinflationary trend in wage inflation.
A stronger-than-expected NFP headline figure, along with hot wage inflation data, could push back against the renewed bets of a September Fed rate cut, offering a fresh life to the US Dollar. This, in turn, could trigger a correction in the EUR/USD pair toward 1.0700. However, if the US employment data strongly indicates labor market slack, the Greenback could see a fresh leg down on a potential confirmation that the Fed will lower rates in September. In such a case, EUR/USD could surge past the 1.0850 level.
Dhwani Mehta, Analyst at FXStreet, offers a brief technical outlook for EUR/USD:Â
“The EUR/USD pair is battling at around 1.0790, where the critical 200-day Simple Moving Average (SMA) and the 100-day SMA coincide. The 14-day Relative Strength Index (RSI) sits above the 50 level, near 54, suggesting that upside potential remains intact.”
“Buyers need to find acceptance above the convergence of the 200-day and 100-day SMAs, for an extended recovery. The next topside barriers for EUR/USD will then be seen at the June 12 high of 1.0852 and the 1.0900 round figure. Conversely, the initial demand area is seen at 21-day SMA at 1.0746, below which the 1.0700 level will be tested en route to the June low of 1.0660,” Dhwani adds.
Economic Indicator
Unemployment Rate
The Unemployment Rate, released by the US Bureau of Labor Statistics (BLS), is the percentage of the total civilian labor force that is not in paid employment but is actively seeking employment. The rate is usually higher in recessionary economies compared to economies that are growing. Generally, a decrease in the Unemployment Rate is seen as bullish for the US Dollar (USD), while an increase is seen as bearish. That said, the number by itself usually can’t determine the direction of the next market move, as this will also depend on the headline Nonfarm Payroll reading, and the other data in the BLS report.
Employment FAQs
Labor market conditions are a key element in assessing the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels because low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central BankÂ’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given their significance as a gauge of the health of the economy and their direct relationship to inflation.