Today’s NFP report is one of the most expected jobs reports of the year, but not for the reasons one may think. Professional traders usually start holidays after the November NFP, so everyone in the industry awaits the jobs data.
Perhaps this year, the agenda is a bit more loaded than other years – the ECB is due next week, and after that, the Fed. But still, the November NFP report is always a milestone – one that signals the official start of the holiday season.
What to Expect from the NFP Report Today?
This particular job release is also important because of the conflicting pieces of economic data so far. On the one hand, the Initial Jobless Claims indicator disappointed up until yesterday, when it has beaten expectations. Also, on the flip side, the employment component of the ISM Manufacturing showed a sector that continues to contract. On the other hand, the ADP (private payrolls) beat expectations a couple of days earlier, and so all bets are off for the NFP today.
Today’s NFP may already be priced in. Just as the ECB and Fed’s decisions in the weeks to come, the markets may have already priced in the data. After all, how else to justify the relentless drop in the Dollar index? After it broke important support at 92, the Dollar index did not look back so far. It dropped significantly in December, despite the month starting only three days ago.
The U.S. labor market remains vulnerable, despite improvements since March. Millions of Americans continue to depend on one form or another of support, and that is not likely to go anywhere anytime soon. Moreover, as the Initial Jobless Claims and the Continuing Claims show, each week, hundreds of thousands of people, close to a million, still apply for support.
December is always special for financial markets because not much is done. This year may be different in the sense that the Fed is still ahead of us, but the government seems paralyzed and busy with the transfer of power.
As usual, during a recession, the focus on tomorrow’s data is on permanent job losses. If the rising trend stops or reverses, that is truly a positive sign. Also, look for revisions to prior data. Any significant ones will only add to volatility.
Finally, expect the U.S. dollar to react differently than normal. It is already stretched, and investors may easily disregard the report, no matter what it shows.