NFP Report: How Strong Is The US Labor Market?

On Friday 7th July 2023, the markets are looking forward to US jobs data. Expectations indicate that the US economy added 224,000 jobs during June, compared to 339,000 in the previous reading. The unemployment rate is expected to decline to 3.6%, and for the wage rate to decline slightly on a monthly basis to 0.3%.


The jobs report is considered crucial in determining expectations for the pace of raising interest rates, so this data is expected to affect market prices, given that this data and inflation data directly correlates to the Fed’s policy decisions.


As per analysts, the expectations are as followed:


A reading higher than expected and higher than the previous


This indicates that the labor market is strong, which may push the Federal Reserve toward more monetary tightening. According to analysts, this may be positive for the dollar and negative for gold and stocks, noting that the last 9 readings of the jobs data were above expectations.


A reading within or less than expected


This indicates that the labor market has started to suffer as a result of the Fed’s monetary tightening policy. This may prompt the Fed to continue to pause interest rates, which may be negative for the dollar and positive for gold and stocks.


In the event that the reading comes in between the previous reading and the expected reading, this would be the most confusing reading, and markets would expect to witness fluctuations in the price movement.


Traders should remember that the initial market reaction, regardless of the nature of the real reading, may be sharp and volatile in the beginning before the market returns to stability. Therefore it is necessary to remember that traders have different ideas and convictions in the way they interpret the information issued, and therefore it cannot be prices move 100% according to that information.



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