Nonfarm Payrolls rise 175,000 in April vs. 243,000 forecast

Nonfarm Payrolls (NFP) in the US rose 175,000 in April, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 315,000 increase (revised from 303,000) recorded in March and came in below the market expectation of 243,000.

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Further details of the jobs report showed that the Unemployment Rate edged higher to 3.9% from 3.8%, while the Labor Force Participation Rate held steady at 62.7%. Additionally, wage inflation, as measured by the change in the Average Hourly Earnings, declined to 3.9% on a yearly basis from 4.1%.

"The change in total nonfarm payroll employment for February was revised down by 34,000, from +270,000 to +236,000, and the change for March was revised up by 12,000, from +303,000 to +315,000," the BLS noted in its press release.

Market reaction to US NFP data

The US Dollar (USD) came under heavy selling pressure with the immediate reaction. At the time of press, the US Dollar Index was down 0.7% on the day at 104.60.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.66%	-0.64%	-0.37%	-0.96%	-0.62%	-1.10%	-0.97%
EUR	0.67%		0.04%	0.30%	-0.28%	0.07%	-0.40%	-0.30%
GBP	0.64%	-0.03%		0.18%	-0.31%	0.02%	-0.57%	-0.31%
CAD	0.35%	-0.32%	-0.29%		-0.60%	-0.25%	-0.73%	-0.61%
AUD	0.95%	0.28%	0.32%	0.58%		0.35%	-0.13%	-0.01%
JPY	0.51%	-0.17%	-0.06%	0.17%	-0.45%		-0.51%	-0.46%
NZD	1.07%	0.39%	0.56%	0.74%	0.13%	0.46%		0.12%
CHF	0.96%	0.30%	0.32%	0.59%	0.01%	0.35%	-0.13%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Economic Indicator

Nonfarm Payrolls

The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, 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 relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.

Why it matters to traders?

America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.

This section below was published as a preview of the US March Nonfarm Payrolls data at 05:00 GMT.

US Nonfarm Payrolls are forecast to rise by 243K in April, down from March’s 303K gain.
The United States Employment report will be released by the Bureau of Labor Statistics at 12:30 GMT.
The US Dollar looks to employment data after the Fed signaled its intention to hold rates higher for longer on Wednesday.

Following Wednesday’s US Federal Reserve (Fed) policy announcements, attention turns toward the high-impact Nonfarm Payrolls (NFP) data, slated for release on Friday at 12:30 GMT.

The US labor market data will be published by the Bureau of Labor Statistics (BLS) and will help determine the scope and timing of the Fed interest rate cuts this year, having a significant impact on the market sentiment and the US Dollar in the near term.

What to expect in the next Nonfarm Payrolls report?

The Nonfarm Payrolls report is expected to show that the US economy added 243,000 jobs last month, sharply lower than the 303,000 job creation seen in March.

The Unemployment Rate is set to stay unchanged at 3.8% in the same period. Meanwhile, Average Hourly Earnings, an important gauge of wage inflation, is expected to extend its downtrend, foreseen to grow by 4.0% in the year through April after rising 4.1% in the twelve months to March.

The headline NFP number combined with the wage inflation data will be closely scrutinized to gauge the Fed rate cut timing after Chair Jerome Powell on Wednesday kept everyone guessing about the same.

The world’s most powerful central bank held the Fed Funds Rate in the range of 5.25% to 5.5% following its May policy meeting. The Fed decided to cut the Treasury runoff from its balance sheet to $25 billion from $60 billion.

Powell acknowledged a broader shift in the Fed’s thinking toward holding borrowing costs at a two-decade high for longer, adding that central bankers want “greater confidence” that inflation is falling toward 2%.

A recent series of economic data from the US justified the Fed’s higher rates for a longer stance, especially after hot core PCE inflation data and a higher-than-expected increase in the US Employment Cost Index (ECI) for the first quarter. Data published by the BLS on Tuesday showed that the ECI, the broadest measure of labor costs, increased by 1.2% last quarter after rising by 0.9% in the fourth quarter.

However, Fed Chairman Jerome Powell ruled out a rate hike as the next move. This, paired with the Fed’s plans to slow the speed of its balance sheet drawdown, was perceived as a dovish lean by the bank toward eventual rate cuts later this year. The probability of the first Fed rate cut, likely in September, rose to 53% from about 47% pre-Fed announcements, according to the CME Group’s FedWatch Tool.

Meanwhile, the US private sector added 192,000 jobs in April, a modest decrease from the upwardly revised 208,000 figure in March, the ADP reported on Wednesday. The data beat the analysts’ estimates of a 175,000 job addition. It’s worth mentioning that NFP has outperformed ADP for eight straight months. On the contrary, US job openings fell by 325,000 to 8.488 million on the last day of March, the BLS said the same day. The market forecast was for an 8.69 million readout.

Previewing the April jobs report, BBH analysts said: “Data highlight will be the jobs report Friday. Consensus sees 250k jobs added vs. 303k in March, while the unemployment rate is expected to remain steady at 3.8%. The pace of wage growth, a key driver of core services CPI inflation, will also draw plenty of attention. Average hourly earnings are expected to slow a tick to 4.0% y/y.”

How will US April Nonfarm Payrolls affect EUR/USD?

Dovish Fed signals smashed the US Dollar across the board alongside the US Treasury bond yields, driving the EUR/USD pair back above the 1.0700 threshold. The focus now shifts to the US NFP report for a fresh directional move in the main currency pair.

A strong-than-expected NFP headline figure combined with hotter-than-expected wage inflation data could push back against expectations of a September Fed rate cut, lifting the US Dollar against the Euro back toward 1.0600. Conversely, if the US employment data strongly indicates loosening labor market conditions, the Greenback could see a fresh leg down on a potential confirmation of rate cuts this year. In such a case, EUR/USD could advance through the 1.0800 threshold.

Dhwani Mehta, Analyst at FXStreet, offers a brief technical outlook for EUR/USD:

“The EUR/USD pair is struggling at around the 21-day Simple Moving Average (SMA) at 1.0715, while the 14-day Relative Strength Index (RSI) sits beneath the 50 level, suggesting that downside risks remain in play.”

“Buyers need to find a strong foothold above 1.0800, the convergence of the 200-day and 50-day SMAs, to unleash further recovery. The next upside barrier for EUR/USD will then be seen at the 100-day SMA at 1.0842. Conversely, the initial demand area is seen at the April 16 low of 1.0619, below which the 1.0550 psychological level will be tested en route to the November 2023 low of 1.0517,” Dhwani adds.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

Why is wage growth important?

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

How much do central banks care about employment?

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

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