The U.S. Bureau of Labor Statistics (BLS) reported on Friday that the number of nonfarm payrolls (NFPs) in the United States (US) increased by 115,000 in April. This printing occurred after an enhance of 185,000. (corrected from 178 thousand) recorded in March and significantly exceeded market expectations of 62 thousand.
Other details of the report showed that the unemployment rate remained unchanged at 4.3%, as expected, while the labor force participation rate fell to 61.8% from 61.9%. Finally, annual wage inflation, as measured by the change in average hourly earnings, rose to 3.6% from 3.4% in March, but was lower than analyst estimates of 3.8%.
“The change in total nonfarm payroll employment for February was revised down by 23,000, from -133,000 to -156,000, and the change for March was revised up by 7,000, from +178,000 to +185,000,” the BLS noted in its news release. “These revisions bring total employment in February and March to 16,000 lower than previously reported.”
Market reaction to non-farm payrolls data in the US
The US dollar is struggling to attract buyers despite upbeat employment data. At the time of this publication, the US dollar index was down 0.4% on the day to 97.88.
Today’s US dollar price
The table below shows the current percentage change of the United States Dollar (USD) against the major listed currencies. The US dollar was the weakest against the Australian dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.44% | -0.49% | -0.23% | 0.09% | -0.52% | -0.49% | -0.41% | |
| EUR | 0.44% | -0.08% | 0.18% | 0.51% | -0.09% | -0.02% | 0.04% | |
| GBP | 0.49% | 0.08% | 0.28% | 0.59% | -0.02% | 0.06% | 0.11% | |
| JPY | 0.23% | -0.18% | -0.28% | 0.33% | -0.31% | -0.24% | -0.17% | |
| BOOR | -0.09% | -0.51% | -0.59% | -0.33% | -0.64% | -0.57% | -0.49% | |
| AUD | 0.52% | 0.09% | 0.02% | 0.31% | 0.64% | 0.07% | 0.13% | |
| NZD | 0.49% | 0.02% | -0.06% | 0.24% | 0.57% | -0.07% | 0.06% | |
| CHF | 0.41% | -0.04% | -0.11% | 0.17% | 0.49% | -0.13% | -0.06% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select the US dollar from the left column and move along the horizontal line to the Japanese yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The following section was published as a preview of US nonfarm payrolls data at 04:00 GMT.
- Employment in the non-agricultural sector is expected to enhance by 62,000 in April.
- The unemployment rate remains stable at 4.3%.
- Before the weekend, USD will be characterized by increased volatility.
The U.S. Bureau of Labor Statistics (BLS) will release nonfarm payrolls (NFP) data for April 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 cutting interest rates later in the year.
What can you expect from the next Nonfarm Payrolls report?
Investors expect NFP to enhance by PLN 62,000. after a surprisingly mighty enhance of 178 thousand recorded in March. The unemployment rate is expected to remain unchanged at 4.3%, while annual wage inflation, as measured by the change in average hourly wages, is expected to rise to 3.8% from 3.5%.
Reviewing the employment report, TD Securities analysts note that after three unstable months, they expect signs of stabilization in the labor market.
“The NFP probably added 80,000, with 85,000 in private profits and 5,000 government layoffs. Healthcare, entertainment and hospitality are likely to contribute most of the improvement. The unemployment rate should continue to stabilize at 4.3%. We also expect average hourly earnings to remain modest at 0.2% m/m, and y/y growth to increase to 3.7%,” they add.
At the beginning of the week, Automatic Data Processing (ADP) reported that employment in the private sector increased by 109,000 in April. This printing followed an enhance of 61,000. (corrected from 62 thousand) recorded in March. Assessing the report’s conclusions, “small and large employers are hiring, but we see softness in the middle,” said Dr. Nela Richardson, ADP chief economist. Meanwhile, the Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) employment index improved to 48 in April from 45.2 in March, reflecting continued decline in service sector payrolls, albeit at a decelerating pace.
Economic indicator
Unemployment rate
Unemployment rate published by the Municipality 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. This rate is usually higher in economies in recession compared to developing economies. Generally speaking, a decline in the unemployment rate is seen as bullish for the US dollar (USD), while an enhance is seen as bearish. That said, the number alone usually cannot determine the direction of the market’s next move, as it will also depend on the headline nonfarm payroll reading and other data in the BLS report.
Read more.
How will data on non-farm payrolls in the US affect EUR/USD?
Since early May, the U.S. dollar (USD) has struggled to remain resilient against its rivals, even though the Federal Reserve’s (Fed) policy meeting in April produced a hawkish surprise, with three policymakers opposing the inclusion of an easing policy stance in the policy statement. Improving risk sentiment due to easing geopolitical tensions in the Middle East and suspicions of Japanese intervention in the currency market are emerging as the main factors behind the weakening dollar.
At a post-meeting press conference, Fed Chairman Jerome Powell admitted that labor demand had clearly weakened, but refrained from deviating from neutral guidelines due to the risk of inflation. “Policy is not a predetermined course,” Powell added, reiterating that they are in a good place to move in either direction. Meanwhile, Chicago Fed President Austan Goolsbee argued that wage growth is no longer a good measure of labor market slack and noted that the labor market is “stable, but not great.”
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 70%. They also see a 13% chance of a 25 basis point (bp) enhance and almost a 17% chance of a 25 basis point cut.
Significant negative surprise, reading below 30,000. in the headline NFP print, especially when combined with a rise in the unemployment rate, could revive expectations for an interest rate cut by the end of the year and put the U.S. dollar under immediate selling pressure.
On the other hand, positive NFP results, close to or above market expectations, may cause investors to refrain from pricing in monetary easing later this year, as vigorous labor market conditions will likely allow Fed policymakers to spend some time assessing inflation dynamics before deciding on the next step. In this scenario, the US dollar could remain resilient to competition and limit the rise of the EUR/USD rate. However, even in this case, a mighty USD rally may be complex to achieve if markets remain risk-on ahead of the weekend.
Eren Sengezer, Chief Analyst of the European Session at FXStreet, presents a miniature technical forecast for EUR/USD:
“The EUR/USD short-term technical outlook points to a bullish tilt. The Relative Strength Index (RSI) is rising towards 60 on the daily chart and the pair is comfortably above the 100-day and 200-day simple moving average (SMA).”
“EUR/USD may face another strong resistance area at 1.1800-1.1810, where the upper part of the Bollinger Band and Fibonacci retracement is 61.8% from the February to April downtrend line. If the pair manages to overcome this level, the next obstacle could be 1.1900-1.1910 (round level, 78.6% Fibonacci retracement). 1.2000 (psychological level, round level).”
“On the other hand, an vital support area appears to have formed at 1.1710-1.1680 (100-day SMA, 200-day SMA). In case EUR/USD falls below this area and starts using it as resistance, 1.1650 (Fibonacci 38.2% retracement) could act as a transient support level ahead of 1.1560 (Fibonacci 23.6% retracement).”
Employment FAQs
Conditions on the labor market are a key element in assessing the condition of the economy, and thus a key factor influencing currency valuation. High employment or low unemployment has a positive impact on consumer spending and therefore economic growth, increasing the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill vacant positions – may also have an impact on inflation levels and therefore monetary policy, as low labor supply and high demand lead to higher wages.
The pace of wage growth in the economy is of key importance to decision-makers. High wage growth means households have more money to spend, which usually leads to higher prices for consumer goods. Unlike more volatile sources of inflation such as energy prices, wage increases are seen as a key element of underlying and sustained inflation because increases are unlikely to be reversed. When deciding on monetary policy, central banks around the world pay particular attention to wage growth data.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks have explicit labor market powers beyond controlling inflation. For example, the United States Federal Reserve (Fed) has a dual mission: promoting maximum employment and stable prices. Meanwhile, the sole task of the European Central Bank (ECB) is to keep inflation under control. Still, despite all the mandates it has, labor market conditions are an vital factor for policymakers, given their importance as an indicator of the health of the economy and their direct link to inflation.
