Friday’s US Employment Report

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Release: Friday at 8:30 a.m. (EST).  

US employment figures provide an irreplaceable insight into the condition of the world’s largest economy. It’s also considered a leading indicator of consumer spending, which drives the economy.

The combination of the indicator’s importance and swift reporting generally makes for sizable market moves.

Stronger-than-expected figures, values that surprise, typically favour a dollar bid. Conversely, weak numbers tend to favour downside in the dollar.

  • The headline figure, the non-farm payrolls report for December, has a consensus value in the range of 150,000-160,000, suggesting a slowdown from November’s 266,000 reading – boosted by the cessation of the General Motor’s strike.
  • The unemployment rate for December is forecast to remain at 3.5%.
  • Average hourly earnings for December are set to mildly increase by 0.3%, while the year-on-year figure is anticipated to hold steady at 3.1%.

Total nonfarm payroll employment rose by 266,000 in November, engulfing expectations. Job growth averaged 180,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018, according to the US Bureau of Labour Statistics.

2019 was the slowest average growth since 2011. Despite this, the reasonably strong end to the year should help keep consumer confidence supported in the early stages of 2020.

Source: ycharts.

Both the unemployment rate, at 3.50% – levels not seen since May 1969 – and the number of unemployed persons, at 5.8 million, changed little in November, the US Bureau of Labour Statistics reported. The labour force participation rate was also little changed at 63.2% in November, and average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $28.29. Over the last 12 months, average hourly earnings increased by 3.1%.

Source: ycharts.

Source: ycharts.

Source: ycharts.

Wednesday’s US ADP surged into the year end, showing 202,000 private payrolls were added to the US economy, beating the consensus 160k. Some desks are stating the data introduced upside risks for Friday’s official employment situation report.

According to ING’s Chief International Economist, James Knightley, ‘Slower growth is likely in December. Moreover, labour market slack is greater than implied by the unemployment alone, meaning wage growth will remain subdued. The net result implies little upside threat for interest rates.’

Capital Economics is confident about the prospects for the labour market this year, citing temporary help, which has been a reasonable leading indicator in recent months, the consultancy says.

From a technical standpoint, the dollar index, or DXY, is challenging a local daily channel resistance, extended from the high 98.54, formed within a larger daily descending channel formation, taken from 99.67/97.14. Daily horizontal resistance is visible at tops pencilled in from 97.86, while long-standing support can be found at 95.94.

With consensus pointing to a lower figure, the larger descending channel resistance and top formation at 97.86 are key levels to keep eyeballs on for a potential reversal lower.