Overview of U.S. Nonfarm Payrolls Report: Determining the Direction of the US Dollar


The employment data report that was reported last December 2023, has been seen as a surprising conclusion where the NFP report has increased by 216,000.

This follows the recruitment of many jobs that have been implemented in the public sector, the health sector, and also the industrial sector in the country.

The "trend" of the unemployment rate in the country is seen to remain strong at 3.7% while the average wage rate (average earnings) is seen to have increased by 0.4%.

Going into January 2024, the growth pattern of the labor market in America could potentially be seen to collapse compared to the previous month.

We at Saracen Markets expect the Nonfarm Payrolls (NFP) data report that will be published tonight will be seen to decrease by 155,000 compared to 216,000 in the previous reading.

Although the employment growth pattern has been seen to be good before, some new factors are seen to be able to put pressure on the labor market in January 2024.

Since the beginning of this month only a small number of industrial sectors have been seen to increase the number of employees. In addition, the movement pattern of the "initial jobless claims" data report is seen to have increased, giving a sign that there are challenges for the people in the country in finding new job opportunities.

Therefore following that, we see the unemployment rate report tonight is expected to increase by 3.8% and the average wage rate (average earnings) is seen by 0.3%.

The January 2024 employment data report that will take place tonight is expected to have a more comprehensive impact than usual. This is because, the increase in new indicator reports such as benchmark review data against previous NFP readings (NFP seasonal survey) is seen to be capable of creating a factor of uncertainty in data evaluation.

This new data survey will begin to be used by government bureaus in the country starting January 2024, where this data survey will include household data and annual population adjustments in assessing the level of impact on the labor market.

But what is certain is that the employment data report tonight is seen as a benchmark for market players regarding the timing and pattern of interest rate cuts this year.

At the FOMC meeting yesterday, interest rates remained at 5.25% - 5.50%. The market has seen that the statement that has been given is "Hawkish" towards the American Dollar when the chairman of the Fed Jerome Powell stated that the institution will not implement interest rate cuts until the inflation rate in the country is reduced to 2%.

In addition, Powell also stated that the institution will not implement interest rate cuts at the March 2024 FOMC meeting.

Date of Production Data Report Expected Market Expected SARACEN Previous Reading

2-Feb Nonfarm Payrolls Jan 180K 155K 216K

2-Feb Unemployment Rate Jan 3.80% 3.80% 3.70%

2-Feb Average Hourly Earnings (MoM) Jan 0.30% 0.30% 0.40%

2-Feb Factory Orders (MoM) Dec 0.40% 0.20% 2.60%

The Impact of NFP Against the US Dollar

The release of the NFP report amounting to 200,000 and above together with the increase in the reading value of the report against the wage inflation report is able to give a "boost" to the "Hawkish" statement that was issued by the Fed at the FOMC meeting yesterday.

However, the American Dollar is seen to be under pressure if tonight's NFP report is seen as disappointing and is able to restore investors' hopes for the implementation of interest rate cuts at the March 2024 FOMC.