NonFarm Payrolls

Breaking: US Nonfarm Payrolls rise by 172K in May vs. 85K expected

Nonfarm Payrolls (NFP) in the United States (US) rose by 172K in May, the US Bureau of Labor Statistics (BLS) reported on Friday. This print followed the 179K increase (revised from 115K) recorded in April and surpassed the market expectation of 85K by a wide margin.Developing story, please refresh the page for updates.

US jobs report post-release checklist – June 5

NFP Actual, Consensus and Deviation	Positive	US Nonfarm Payrolls rose by 172,000 in May, following the 179,000 increase recorded in April. This print came in well above the market expectation for an increase of 85,000.
NFP Revisions	Neutral	“The change in total nonfarm payroll employment for March was revised up by 29,000, from +185,000 to +214,000, and the change for April was revised up by 64,000, from +115,000 to +179,000. With these revisions, employment in March and April combined is 93,000 higher than previously reported,” the BLS’ press release showed.
Unemployment rate	Neutral	The US Unemployment Rate remained unchanged at 4.3% in May, as anticipated.
Labor Force Participation Rate	Neutral	The Labor Force Participation Rate held steady at 61.8% in May, macthing the market expectation.
Average Hourly Earnings	Neutral	Annual wage inflation, as measured by the change in Average Hourly Earnings, softened to 3.4% in May from 3.6% in April, as forecast.

US jobs report pre-release checklist – June 5

Previous Nonfarm Payrolls	Positive	US Nonfarm Payrolls rose by 115,000 in April, following the 185,000 increase recorded in March and surpassing the market expectation of 62,000 by a wide margin.
Challenger Job Cuts	Negative	US-based employers’ planned layoffs rose to 97,006 in May, marking the highest reading for the month of May since 2020.
Initial Jobless Claims	Negative	The 4-week moving average of weekly Initial Jobless Claims was 214,750 in the week ending May 30, an increase of 6,500 from the previous week’s revised average.
Continuing Jobless Claims	Negative	The advance number for seasonally adjusted insured unemployment during the week ending May 23 was 1,777,000, a decrease of 8,000 from the previous week's revised level.
ISM Services PMI	Neutral	The ISM Services PMI rose to 54.5 in May from 53.6 in April, while the employment Index of the PMI survey was virtually unchanged at 47.9, reflecting an ongoing contraction in the service sector payrolls, albeit at a soft pace.
ISM Manufacturing PMI	Neutral	The headline ISM Manufacturing PMI rose to 54 in May from 52.7 in April. The Employment Index improved slightly to 48.4 from 46.4 but remained in the contraction territory.
University of Michigan Consumer Confidence Index	Negative	The University of Michigan’s Consumer Sentiment Index declined to 44.8 in May from 48.2 in April. In this period, the Consumer Expectations Index fell to 44.1 from 48.1.
Conference Board Consumer Confidence Index	Negative	The Conference Board’s Consumer Confidence Index declined to 93.1 in May from 93.8 in April. “Consumer appraisals of current business conditions and the current labor market were moderately less positive compared to last month,” the publication noted.
ADP Employment Report	Positive	Private-sector employment increased 122K in May, following the 105K growth reported in April. This print came in above the market expectation of 117K.
JOLTS Job Openings	Neutral	The number of job openings in the US rose sharply to 7.6 million in April from 6.88 million in March. Upcoming Nonfarm Payrolls data will be for May.

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BIG PICTURE

NFP: The most important US economic indicator

NFP Definition

The Nonfarm Payrolls (NFP) report measures the number of jobs added or lost in the US economy over the prior month. It is usually released by the US Department of Labor on the first Friday of each month at 8:30 ET.

The report is important because the US is the largest economy in the world and its currency (the US Dollar) is the global reserve currency. This means that many economies peg their currency's value to that of the USD and many commodities such as Gold and Oil are priced in terms of the Dollar.

The NFP report tends to move all markets: currencies, equities, bonds, commodities and cryptocurrencies. It does so immediately after the release of the economic data and sometimes dramatically.

Why is NFP important?

The Nonfarm Payrolls (NFP) report is arguably one of the biggest market movers in the Forex. The NFP figure can influence the decisions of the Federal Reserve (Fed) by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation.

A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work.

The Fed will typically raise interest rates to combat high inflation triggered by low unemployment and lower them to stimulate a stagnant labor market.

How does NFP affect the US Dollar?

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower.

NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

How does NFP affect Gold?

Nonfarm Payrolls are generally negatively correlated with the price of Gold. This means a higher-than-expected payroll figure will have a depressing effect on the Gold price and vice versa.

Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold.

Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

How to trade NFP?

Those who trade NFP releases base their advice on previous preparation and some fundamental research. The elaboration of some macroeconomic analysis is essential for successful trading.

This research includes averages of past headline NFP numbers, Weekly Jobless Claims, ISM reports, or other employment data published earlier such as ADP, JOLTS, or the Challenger report.

Nonfarm Payrolls is only one component within a bigger jobs report and the data can be overshadowed by the other components.

At times, when NFP comes out higher than forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary.

The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but to a much lesser extent.