Nonfarm Payrolls increase 206,000 in June vs. 190,000 forecast

Nonfarm Payrolls (NFP) in the US rose 206,000 in June, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 218,000 increase (revised from 272,000) recorded in May and came in above the market expectation of 190,000.

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Other details of the jobs report showed that the Unemployment Rate edged higher to 4.1% from 4%, while the Labor Force Participation Rate ticked up to 62.6% from 62.5%. Finally, wage inflation, as measured by the change in the Average Hourly Earnings, declined to 3.9% on a yearly basis from 4.1%, matching the market expectation.

"The change in total nonfarm payroll employment for April was revised down by 57,000, from +165,000 to +108,000, and the change for May was revised down by 54,000, from +272,000 to +218,000," the BLS noted in its press release. "With these revisions, employment in April and May combined is 111,000 lower than previously reported."

Market reaction to US Nonfarm Payrolls data

The US Dollar (USD) came under modest selling pressure with the immediate reaction to the Nonfarm Payrolls data. At the time of press, the USD Index was down 0.2% on the day at 104.90.

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 Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.15%	-0.31%	-0.35%	0.12%	-0.24%	-0.29%	-0.11%
EUR	0.15%		-0.17%	-0.16%	0.29%	-0.08%	-0.13%	0.03%
GBP	0.31%	0.17%		0.00%	0.45%	0.09%	0.03%	0.16%
JPY	0.35%	0.16%	0.00%		0.48%	0.14%	0.06%	0.22%
CAD	-0.12%	-0.29%	-0.45%	-0.48%		-0.37%	-0.41%	-0.28%
AUD	0.24%	0.08%	-0.09%	-0.14%	0.37%		-0.06%	0.10%
NZD	0.29%	0.13%	-0.03%	-0.06%	0.41%	0.06%		0.13%
CHF	0.11%	-0.03%	-0.16%	-0.22%	0.28%	-0.10%	-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 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).

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 June Nonfarm Payrolls data at 05:00 GMT.

US Nonfarm Payrolls are expected to rise 190K in June, slowing from May’s 272K increase.
The United States Bureau of Labor Statistics will release the Employment report at 12:30 GMT.
The US Dollar awaits employment data after Fed Chair Jerome Powell’s dovish remarks on Tuesday.

With US Federal Reserve (Fed) Chairman Jerome Powell’s Sintra appearance out of the way, all eyes now remain on top-tier Nonfarm Payrolls (NFP) data for June, due on Friday at 12:30 GMT.

The Bureau of Labor Statistics (BLS) will release the US labor market data, which could offer cues on the timing of the Fed’s first interest-rate cut this year and the US Dollar’s (USD) next direction.

What to expect in the next Nonfarm Payrolls report?

The Nonfarm Payrolls report is set to show that the US economy created 190,000 jobs in June after having added 272,000 in May.

The Unemployment Rate will likely hold steady at 4.0% in the same period. Meanwhile, a closely-watched measure of wage inflation, Average Hourly Earnings, is seen increasing by 3.9% in the year through June following May’s growth of 4.1%.

Markets are set to analyze these key data sets closely, as they could provide a fresh guide to the possible timing of the Fed’s dovish pivot.

Markets scaled up their expectations for a Fed rate cut in September after Tuesday’s Chairman Jerome Powell’s commentary at the European Central Bank (ECB) Forum on Central Banking in Sintra.

Powell sounded quite optimistic about the recent encouraging inflation reports but said he needed more data before considering rate cuts. Markets perceived his acknowledgment of the progress in the disinflationary trend as dovish.

Meanwhile, the US private sector added 150,000 jobs in June, a modest decrease from the upwardly revised 157,000 figure in May, the ADP reported on Wednesday. The data missed the analysts’ estimates of a 160,000 job addition. It’s worth mentioning that NFP has outperformed ADP in nine out of the past ten months.

Fed Chair Powell’s dovish commentary, combined with weak US employment data, ramped up bets for a rate cut by the US central bank in September, with markets now seeing a 73% chance against a 64% probability seen early Tuesday.

Previewing the June employment situation report, BBH analysts said: “Bloomberg consensus is 190k vs. 272k in May, while its whisper number stands at 198k currently. For reference, the average gain over the past 12 months is 232k. The unemployment rate is expected to remain steady at 4.0% even as the participation rate is expected to rise a tick to 62.6%. With the labor market in better alignment, the pace of wage growth will be a bigger driver of Fed expectations. Average hourly earnings are forecast to rise 0.3% MoM, with the YoY rate expected to fall two ticks to 3.9.”

How will US June Nonfarm Payrolls affect EUR/USD?

The return of the doves smashed the US Dollar across the board alongside the US Treasury bond yields, driving the EUR/USD pair briefly above the 1.0800 threshold. Attention now turns to the US NFP report to affirm the loosening labor market conditions and the disinflationary trend in wage inflation.

A stronger-than-expected NFP headline figure, along with hot wage inflation data, could push back against the renewed bets of a September Fed rate cut, offering a fresh life to the US Dollar. This, in turn, could trigger a correction in the EUR/USD pair toward 1.0700. However, if the US employment data strongly indicates labor market slack, the Greenback could see a fresh leg down on a potential confirmation that the Fed will lower rates in September. In such a case, EUR/USD could surge past the 1.0850 level.

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

“The EUR/USD pair is battling at around 1.0790, where the critical 200-day Simple Moving Average (SMA) and the 100-day SMA coincide. The 14-day Relative Strength Index (RSI) sits above the 50 level, near 54, suggesting that upside potential remains intact.”

“Buyers need to find acceptance above the convergence of the 200-day and 100-day SMAs, for an extended recovery. The next topside barriers for EUR/USD will then be seen at the June 12 high of 1.0852 and the 1.0900 round figure. Conversely, the initial demand area is seen at 21-day SMA at 1.0746, below which the 1.0700 level will be tested en route to the June low of 1.0660,” Dhwani adds.

Employment FAQs

How do employment levels affect currencies?

Labor market conditions are a key element in assessing 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 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 because 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 their significance as a gauge of the health of the economy and their direct relationship to inflation.

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