Non-Farm Payroll will determine Forex risk
Friday, June 4th, 2010 In The News by adminToday’s Non-Farm Payroll announcement should be very telling as to the tone of the market for the month. No question that the “NFP” is the most volatile of all announcements in forex.
Let me just say that I will be sitting on the sidelines waiting to see how the numbers reflect on job growth, especially in the private sector, and I will not be alone as it referenced in this Wall Street Journal article.
The private sector numbers are the key to this report, and will determine if the market is going to “risk on” or “risk off”. The last two months the numbers have been decent and have even seen revisions increasing the new jobs returned to the market. However, there are a couple of keys to those numbers that have still put us in a “risk off” position.
1. Many of the jobs gained were temporary as the US government was hiring for census counts etc.
2. Many people had left the job market, giving up for the midterm in looking for a job.
These two events caused the numbers to “look” a bit better than they actually were and the underlying current kept risk to a minimum.
Now we come to the May numbers. What is expected? Many are looking for a job number of 500,000 and yesterday in a memo sent to their clients reportedly Goldman Sachs is calling for 600,000 new jobs. Those numbers sound appealing and they are a step in the right direction but the underlying theme could be very mixed. Two key questions will emerge: Will the actual unemployment number drop or will in continue to climb? Many are expecting a drop of only .1%. The second and maybe the most important question. How many of the new jobs will be in the private sector?
The unemployment rate could have such a small move because many of the people that have been unemployed may actually begin looking for jobs again which would offset the number of new jobs found. Jobs that are created by the US government add to the overall market but they are not created equal to private sector jobs. Jobs created in the private sector reflect better economic growth and stability in the long term rebound from this recession.
So play it safe, don’t try to guess the market move, but prepare yourself for the market as this could set up a move over the next couple of weeks.
TraderCisco