Nonfarm Payrolls (NFP) in the United States (US) rose by 139,000 in May, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 147,000 increase (revised from 177,000) recorded in April and came in slightly better than the market expectation of 130,000.

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Other details of the report showed that the Unemployment Rate held steady at 4.2% as anticipated, while the Labor Force Participation Rate edged lower to 62.4% from 62.6%. Finally, annual wage inflation, as measured by the change in the Average Hourly Earnings, remained unchanged at 3.9%, surpassing the market forecast of 3.7%.

"The change in total Nonfarm Payroll employment for March was revised down by 65,000, from +185,000 to +120,000, and the change for April was revised down by 30,000, from +177,000 to +147,000. With these revisions, employment in March and April combined is 95,000 lower than previously reported," the BLS noted in its press release.

Market reaction to Nonfarm Payrolls data

This data failed to trigger a noticeable market reaction. At the time of press, the US Dollar (USD) Index was up 0.3% on the day at 99.00.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

USD EUR GBP JPY CAD AUD NZD CHF
USD 0.31% 0.19% 0.59% 0.01% 0.17% -0.02% 0.34%
EUR -0.31% -0.10% 0.23% -0.30% -0.20% -0.31% 0.04%
GBP -0.19% 0.10% 0.33% -0.19% -0.09% -0.20% 0.15%
JPY -0.59% -0.23% -0.33% -0.50% -0.28% -0.46% -0.27%
CAD -0.01% 0.30% 0.19% 0.50% 0.15% -0.01% 0.33%
AUD -0.17% 0.20% 0.09% 0.28% -0.15% -0.11% 0.26%
NZD 0.02% 0.31% 0.20% 0.46% 0.01% 0.11% 0.34%
CHF -0.34% -0.04% -0.15% 0.27% -0.33% -0.26% -0.34%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

This section below was published as a preview of the May Nonfarm Payrolls data at 05:00 GMT.

  • Nonfarm Payrolls are expected to rise by 130K in May, down from the 177,000 increase recorded in April.
  • The United States Bureau of Labor Statistics will publish the employment report at 12:30 GMT.
  • The US employment report could influence the odds of a July Fed rate cut, rocking the US Dollar.

Nonfarm Payrolls (NFP), one of the most high-impact economic data releases in the United States (US), is expected to show a further cooling of the jobs market. The main question surrounding the report is whether it will show that labor market conditions are healthy enough for the Federal Reserve (Fed) to continue to wait before cutting the policy rate.

The US Bureau of Labor Statistics (BLS) is due to publish the NFP data for May at 12:30 GMT. The data could have a strong bearing on the US Dollar (USD) performance in the near term.

What to expect from the next Nonfarm Payrolls report?

Economists expect the Nonfarm Payrolls to show a 130,000 job gain in May after the better-than-forecast 177,000 increase reported in April. The Unemployment Rate (UE) is seen unchanged at 4.2%.

Average Hourly Earnings (AHE), a closely watched measure of wage inflation, are expected to rise by 3.7% year-over-year (YoY) in April, following a 3.8% increase in March and April.

Previewing the April employment report, TD Securities analysts said: “Job growth should have cooled to its slowest pace in three months, with payrolls registering a below-consensus 110k gain in May.”

“We anticipate cooling in job creation for the goods and government sectors, as well as for leisure & hospitality. The Unemployment Rate is expected to stay unaltered at 4.2% for a second consecutive month, while wage growth likely picked up to 0.3% m/m,” they added.

How will US May Nonfarm Payrolls affect EUR/USD?

The US Dollar (USD) struggles to stay resilient against its rivals this week as investors await clarity on US President Donald Trump’s trade policy. Additionally, disappointing macroeconomic data releases, such as the Automatic Data Processing’s (ADP) monthly report that showed a meager increase of 37,000 in private sector payrolls, contributed to the USD decline.

In response to the weak ADP data, US President Trump criticized Fed Chairman Jerome Powell of being too late and called upon him to lower interest rates.

Meanwhile, Minneapolis Fed President Neel Kashkari acknowledged earlier this week that the labor market is showing some signs of slowing down. However, Kashkari argued that the central bank must still stay in a wait-and-see mode to assess how the economy responds to the uncertainty. 

Similarly, Atlanta Fed President Raphael Bostic said that the best approach for monetary policy is “patient,” adding that the job market appears to be broadly healthy despite showing some signs of weakness.

In case the NFP data disappoints with a reading below 100,000, investors could reassess the possibility of a Fed rate cut in July and cause the USD to come under renewed selling pressure. In this scenario, EUR/USD is likely to gather bullish momentum heading into the weekend. 

Conversely, a significant positive surprise, with an NFP print between 160,000 and 200,000, or higher, could convince markets of at least two more meetings (June and July) in which the Fed will hold interest rates steady. The USD could gather strength with the immediate reaction to such a print and trigger a leg lower in EUR/USD. 

According to the CME FedWatch Tool, markets are currently pricing in about a 30% probability of a 25 bps reduction in the policy rate in July.

Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“EUR/USD clings to a bullish bias in the near term, with the Relative Strength Index (RSI) indicator on the daily chart holding comfortably well above 50. Moreover, the pair continues to pull away from the 20-day Simple Moving Average (SMA), currently located near 1.1300, after stabilizing above it in late May.”

“On the upside, 1.1500 (static level, round level) aligns as the first resistance level for EUR/USD ahead of 1.1575 (April 21 high) and 1.1700 (static level from February 2021). Looking south, supports could be spotted at 1.1300 (20-day SMA), 1.1250 (Fibonacci 23.6% retracement of the January-May uptrend, 50-day SMA) and 1.1050 (Fibonacci 38.2% retracement)."

Nonfarm Payrolls FAQs

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

(This story was corrected at 07:27 GMT to replace 'April' in the second sub-header with 'May.')

Source: Fxstreet