September Nonfarm Payrolls – what to expect?

Today, markets are waiting for an important report on employment outside of US agriculture in September. According to forecasts, the economy has created more than 500 thousand jobs, and the unemployment rate has fallen to at least 5.1%. 

Why is this report important and how can it affect the dynamics of the US dollar?

Ahead of the publication, the dollar remains relatively stable against most of the leading currencies. At the same time, government bond yields resumed growth, as the September peyroles may strengthen the determination of the US Federal Reserve to soon wind down the asset repurchase program. 

However, the regulator is already quite determined: in his last statement, Fed Chairman Jerome Powell said that the curtailment could begin as early as November, and a strong employment report is not a prerequisite. Thus, even a relatively weak report will only lead to a temporary drawdown of the US dollar. Moreover, a decrease in the unemployment rate to 5% can compensate for any weakness in employment statistics.

While waiting for the report analysts share their forecasts. The following arguments are in favor of strong data: 

• earlier, ADP announced the creation of 568 thousand jobs;

• the index of business activity in the manufacturing sector from ISM increased from 49.0 to 50.2;

• The consumer confidence index from the University of Michigan has recovered;

• the number of initial applications for unemployment benefits decreased, as did the total number of people receiving benefits.

The following arguments can be made in favor of a weak report:

• the index of business activity in the service sector from ISM decreased from 53.7 to 53;

• The Conference Board consumer confidence index fell to a 7-month low;

• Challenger reported a 13.8% increase in the number of layoffs (from a 24-year low).