It is the NFP day, and no trader can ignore its importance. Employment levels are more of a concern during recessionary times, especially when it comes to the largest economy in the world – that of the United States.
So far this week, the labour-related data showed a mixed picture. Investors go clueless into today’s NFP release for the simple reason that the information at hand is contradictory, to say the least.
ISM Employment Component Continues to Shrink
Every NFP week contains at least one ISM (i.e., Institute for Supply Management) report. They equate the PMI’s in the Eurozone or the United Kingdom, and refer to the manufacturing and non-manufacturing sectors.
Investors focus on the employment component and see the changes against two metrics. One is the previous month’s report. The other is the 50 level, considered the line in the sand when it comes to contractionary and expansionary sectors.
In July, both the ISM Manufacturing and Non-Manufacturing reports showed a contractionary employment sector. Hence, a negative heading into today’s NFP report.
ADP Missed July Expectations, but June Data was Revised Higher
Two days ahead of the NFP release, the private payroll report, also known as the ADP report, provides further clues about the state of the U.S. labour market. The report missed expectations by a mile.
Only 167k jobs were created, on expectations of over a million or so. While the markets reacted promptly on the headlines, they missed the revised number for the prior month – up by more than the missing jobs in July’s report.
Trump Hinted at a Fabulous Jobs Report this Friday
To add to the confusion, President Trump tweeted this week that a fabulous jobs report comes out on Friday. This is nothing short of amazing.
First, not even the President of the United States should have access to such data in advance. Second, will markets honestly believe that such a statement is true? And finally, does it mean that the NFP headline beats expectations, or that the previous data will be revised higher?
Regardless of what the outcome will be, this is one of the most eagerly expected job reports in a while. Because it comes a few months into the coronavirus crisis, it shows the real impact the pandemic had on the largest economy in the world – a crucial fundamental factor in any market analysis.