The U.S. Bureau of Labor Statistics (BLS) will release nonfarm payrolls (NFP) data for March on Friday at 12:30 GMT.
Investors will analyze details of the jobs report to gauge whether the Federal Reserve (Fed) is likely to consider raising interest rates later in the year. Despite this, the immediate market reaction may remain feeble and trading volumes will remain low on Good Friday.
What can you expect from the next Nonfarm Payrolls report?
Investors expect NFP to boost by PLN 60,000. after a disappointing drop of 92,000. recorded in February. The unemployment rate is expected to remain unchanged at 4.4%, while annual wage inflation, as measured by the change in average hourly earnings, is expected to remain steady at 3.8%.
Reviewing the employment report, TD Securities analysts note that they expect a moderate boost in NFP in March by 30,000.
“The reversal of weather conditions and the effects of strikes should result in a wage structure similar to that of the end of 2025, with outsized support for health care. We also expect the unemployment rate to remain at 4.4%, with the risk of rising. Average hourly wages likely increased by a slight 0.2% m/m, which translates to 3.6% y/y,” they add.
At the beginning of the week, Automatic Data Processing (ADP) reported that employment in the private sector increased by 62,000 in March. This printing followed an boost of 66,000. (corrected from 63 thousand) recorded in February. Assessing the report’s findings, “overall employment remains steady, but job growth continues to favor certain industries, including health care,” said Dr. Nela Richardson, ADP chief economist. Meanwhile, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) was 48.7 in March, indicating a continued decline in manufacturing employment.
Danske Bank’s research team also predicts that the NFP will reach 30,000 and the unemployment rate will rise to 4.5%. “Recent indicators, including a decline in the daily number of job advertisements and weekly growth in private sector employment, point to a weaker labor market situation,” they note.
Economic indicator
Non-agricultural wages
The Nonfarm Payrolls publication presents the number of up-to-date jobs created in the U.S. over the previous month across all nonfarm businesses; is published by US Bureau of Labor Statistics (BLS). Monthly payroll changes can be extremely volatile. This number is also subject to forceful reviews, which can also create volatility in the Forex market. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the unemployment rate are as crucial as the headline data. The market reaction therefore depends on how the market evaluates all the data contained in the BLS report.
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How will data on non-farm payrolls in the US affect EUR/USD?
The U.S. dollar outperformed its peers in March, benefiting from a risk-averse market climate and rising expectations of a hawkish tilt in the Federal Reserve’s (Fed) policy outlook as rising oil prices revived fears that inflation would get out of control. The US dollar index (DXY) gained over 2% in March and experienced increased volatility in the first days of April.
Speaking at an event hosted by Harvard University earlier this week, Fed Chairman Jerome Powell noted that there is tension between the Fed’s twin missions of maintaining maximum employment and stable prices, and said it is a good time to wait and see how the current situation develops. Commenting on labor market conditions, Powell said the number of up-to-date jobs is very low and entry into the labor market is tough.
Meanwhile, New York Fed President John Williams admitted that the labor market was sending signals, adding that the low employment rate could deepen economic pessimism.
According to the CME FedWatch Tool, markets are currently pricing in the likelihood that the Fed’s policy rate will remain unchanged in the 3.5-3.75% range through the end of 2026 from about 80%. In early March, markets predicted a 92% chance that the Fed would cut its key interest rate at least once this year.
A positive surprise on the NFP, with a reading of at least 70,000, may cause markets to reassess the possibility of the Fed raising interest rates and strengthen the USD. On the other hand, a rate below 50,000, especially when combined with a rise in the unemployment rate, could make it tough for the USD to outperform its rivals and support EUR/USD maintain its position. Nevertheless, if the de-escalation of the conflict in the Middle East does not lead to a sustained decline in oil prices, it may be tough for EUR/USD to achieve a sustained upward trend even if the NFP misses analyst estimates.
Eren Sengezer, Chief Analyst of the European Session at FXStreet, presents a low technical forecast for EUR/USD:
“The short-term technical outlook for EUR/USD suggests that the bearish bias remains unchanged despite the latest recovery attempt. The pair remains below the downtrend line established in late January, and the Relative Strength Index (RSI) indicator on the daily chart is retreating towards the 40s after failing to break the midline of 50 earlier in the week.”
“On the other hand, 1.1430-1.1400 (lower boundary of the Bollinger Band, static level) marks key support ahead of 1.1300 (circular level) and 1.1220 (static level). Looking north, immediate resistance can be seen at 1.1600 (circular level, downtrend line) ahead of the 1.1680-1.1700 area, where The 100-day simple moving average (SMA) and 200-day SMA are in line.
Frequently asked questions about non-farm wages
Nonfarm payrolls (NFP) data are part of the U.S. Bureau of Labor Statistics’ monthly employment report. Specifically, the Nonfarm Payrolls component measures the change in the number of people employed in the U.S. over the previous month, excluding the agriculture industry.
Nonfarm payrolls data can influence Federal Reserve decisions, providing a measure of the Fed’s effectiveness in fulfilling its mandate to support full employment and 2% inflation. A relatively high NFP number means more people are employed, earning more and likely spending more. On both sides, a relatively low Nonfarm Payrolls score may mean that people are struggling to find work. The Fed typically raises interest rates to combat high inflation caused by low unemployment and lowers them to encourage a stagnant labor market.
Nonfarm payrolls data generally have a positive correlation with the US dollar. This means that when wage data turns out to be higher than expected, the US dollar tends to rise and vice versa when it is lower. NFPs influence the US dollar due to their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means that the Federal Reserve will be tighter in its monetary policy, supporting the USD.
The number of non-farm payrolls is generally negatively correlated with the gold price. This means that higher than expected wage numbers will have a depressing effect on the gold price and vice versa. A higher NFP has an overall positive impact on the value of the USD and like most major commodities, gold is priced in US dollars. So if the US dollar appreciates, it takes fewer dollars to buy an ounce of gold. Additionally, higher interest rates (usually helped by higher NFPs) also reduce the attractiveness of gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm payrolls are just one element of a larger jobs report and may be overshadowed by other elements. Sometimes, when NFP reports higher-than-expected results but average weekly earnings are lower than expected, the market has ignored the potentially inflationary impact of the headline result and interpreted the decline in earnings as deflationary. The components of participation rate and average weekly working hours can also influence market reaction, but only in uncommon cases such as the “Great Resignation” or the global financial crisis.
