The Non-farm payroll (NFP) is a monthly measure of the United States labor market health, released every first Friday of the month by the Bureau of Labor Statistics. It is a key economic indicator for the United States economy and among the most market-moving data points for the US Dollar, US equities, Treasuries, and Gold.
Last two years, the United States economy experienced a dramatic whiplash caused by unprecedented pandemic-related lockdowns. This phenomenon dragged the nation to a level of extreme unemployment, deflationary pressures, and recession.
Fortunately in 2022, the labor market has picked up steam and the economy is booming. Lately, a report from an analyst relayed that the US economy has revived about 90.4% of the 21.991 million jobs erased during the pandemic lockdowns. From the economic projection of this month’s NFP forecast, American firms are likely to hire close to or more than 490k employees, which will further strengthen the labor market. The growth progression was influenced basically by fiscal policy, monetary policy, and other growth catalysts instituted.
On the monetary front, quantitative easing and the Federal Reserve’s dovish policy have kept the economy afloat and the labor market booming. But currently, the quantitative easing program, asset purchases, and stimulus packages have ended due to massive recovery.
According to the Federal Reserve chairman, Jerome Powel, “the fed has been committed to its core objective of maximum employment and price stability mandate issued by the congress. He further stated that aggregate demand remains very strong, the economy is flourishing and the labor market is recovering at a fast pace as the labor force participation heightens”.
The FOMC participants continue to project rapid economic growth and job gains. Their median term GDP projection stands at 5.5%.
The argument is, can the hawkish policy solve the latest inflation conundrum? Fundamentally, the inflationary pressure is demand-driven. As chips and commodities are supply-constrained, prices drive higher. However, the Federal Reserve chair stated that it will use its monetary policy tool to cool off the economy from overheating by further hiking the interest rate by 50 point base. Currently, its unemployment rate stood at 5.2%, and its Purchasing Manager’s Index trend at 55.4% which indicates industry expansion and flourishing health of the manufacturing sector. In the first quarter (Q1), its GDP contracted by 1.4% due to geopolitical tension and sanctions, but recovery steadies in the second quarter.
Nevertheless, Traders should brace themselves up for a period of high volatility as an increase in Non-farm Payroll will strengthen the USD while a decrease will weaken the USD.
In response to the news release, trade the financial market with the following trading instruments on the ACT Brokers platform(actmarkets.com), as they are mostly affected by the data release; EURUSD, GBPUSD, XAUUSD, USDJPY, USDCAD, USDCHF, AUDUSD, NZDUSD, US30, US100, USOIL, US Oil, Facebook, Amazon, Tesla, etc.
Time Schedule for next NFP release:
Date: Friday 6th May, 2022
Time: 1:30 pm (GM + 1)
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