NFP: U.S. Adds 164K vs 192K Jobs Expected In April

by Ike Obudulu Posted on May 4th, 2018

Washington, DC, USA: Payrolls fell short of expectations at 164000 in April, compared with the 192,000 median estimate in a survey of economists, U.S. Bureau of Labor Statistics figures showed Friday. Unemployment rate came in at 3.9% vs. 4.0% expected. The unemployment rate fell in April because the labor force shrank – 236,000 Americans who were either working or looking for work dropped out of the job market. Wage gains were 0.1 per cent more than the prior month and 2.6 per cent higher year-on-year but lower than the 0.2 per cent and 2.7 per cent forecasts.

Economists expected a hiring rebound in April to 192,000 positions added after March’s disappointing number.  For the third report in a row, expectations were for a decline in the jobless rate to 4.0 percent from the 4.1 percent level it has held since October 2017- as employment growth remains higher than labour force growth. Disappointment will lead to bearish reversals in the dollar..

Average hourly wages ticked up 4 cents in April. They grew 2.6% from a year earlier, slightly below economists’ expectations.

Professional and business services created the most new jobs in April, with 54,000, while manufacturing and health care added 24,000 apiece.

Mining, a category that includes not just coal and metals but jobs in oil and gas fields, added 8,000 positions,

In March, the Average Hourly Earnings picked up from 0.1% to 0.3%, signaling a growth in the labor market. However, economists expected average hourly earnings to drop to 0.2% from 0.3% in this month’s report but still a gain of 2.7% on an annualized basis.

Lately the wage growth numbers have eclipsed the headline NFP number as the most widely watched and important part of the release. The US is considered to be at full employment and this should eventually lead to a sustained increase in wage growth, which in turn will push up inflation. However, wage growth has been slow to respond to tightening in the jobs market, and is only recently showing signs of a pick-up but there are now tentative signs of acceleration.

On Wednesday, the ADP figure came out better than the forecast and due to its positive correlation with the NFP, investors expected the same behavior from the NFP

EUR/USD remained sidelined ahead of NFP on Friday, mainly trading sideways, as USD bulls took profits while continuing to weigh the words of the FOMC statement released on Wednesday.

Ahead of NFP, EURUSD traded close to a 4-month low, below the 1.2000 psychological level and  below its 200-period simple moving average on the daily chart which is considered a bearish signal.

Current job gains are consistent with 2.5-3.0 percent economic growth in the current quarter and an FOMC June rate hike.

Nonfarm Payroll (NFP) Report

The Nonfarm Payroll (NFP) report is released on  the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation

It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.

Economic indictors in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:

Non-Farm Employment Change

Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity

Average Hourly Earnings

The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;

Unemployment Rate

Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.

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