US Employment Data | Trade on USD

Jarratt Davis

Special Consultant to the FPA
US Employment data releases will take place today at 1.30pm BST. Given there are three separate and important metrics, there can be moves in both directions if one figure comes out better while another figure worse. We will be looking for matching deviations across all three metrics in order to prompt the ideal USD trade.


Released monthly by the Bureau of Labor Statistics, this data release shows three key employment metrics: Non-Farm Employment Change, also known as Non-Farm Payrolls, measures the change in the number of employed people during the previous month, excluding the farming industry. This is vital economic data released shortly after the month ends. The combination of importance and earliness makes for hefty market impacts. Job creation is a leading indicator of consumer spending which accounts for a majority of overall economic activity. The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. Although it's generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labour-market conditions. Unemployment is also a major consideration for those steering the country's monetary policy. Average Hourly Earnings measures the change in the price businesses pay for labour, excluding the farming industry. This is a leading indicator of consumer inflation because when businesses pay more for labor the higher costs are usually passed on to the consumer.


The USD has remained well supported over recent weeks as both the Fed's meeting minutes from their April 27 meeting and recent comments from Fed members, all suggest a rate hike may soon be appropriate providing economic data warrants further action. Futures markets are currently pricing in only a 21% chance of a June hike, however a 58% chance of a July hike. Although the Fed's main concern remains low inflation with most Fed members overall satisfied with the state of the US labour market, employment data remains highly influential to the Fed's decision making process, especially Average Weekly Earnings data which as an underlying factor for inflation has became an increasingly important data point.

Payrolls are expected to rise by 164K for May, marginally higher than last months 160K however still below the significant 200K level. The unemployment rate is expected to tick down to 4.9% from April's 5.0%. Particular focus will be paid to hourly earnings given its influence on inflation, this is expected to rise by 0.2%, slightly lower than last months 0.3%.

US Employment data releases were also covered in this weeks weekly risk events video here.

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