United States Nonfarm Payroll: Delta Variant Likely to Slow but Not Hinder the Economic Recovery

The Non-farm payroll (NFP) is a monthly measure of 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.

It reflects the surveyed net change in US employment, which include goods, construction, and manufacturing, but excluding farm workers, private household employees and Non-profit organization.

The United States is no doubt one of the foremost causalities as the delta variant wounded its way through the global economy, although experts believe that the catastrophe caused by the pandemic has slowed the pace of the economic recovery but would not derail it.

A few months ago, the world was close to the gate of normalcy after suffering from the wrath of Covid-19 which crippled virtually all the economies, however, that progression has taken a twist down south with the outbreak of the more infectious Delta variant, which has not only halted the positive economic flow but also led to a pause in the loosening of COVID-19 containment measures, and even a re-tightening of restrictions in some regions to avoid further spread of the deadly virus.

As investors eagerly awaited last week’s statement by the Federal Reserve’s policy committee following two days of deliberation, hopes of major news that would drive markets turned out disappointing, rather, the Fed left interest rates unchanged and indicated it will continue the $120 billion monthly asset purchases until there is substantial further progress towards the goal of 2.0% inflation and full employment which suggest that the Fed has been successful in anchoring expectations as investors collectively yawn in response to its statements and actions.

Traders are anticipating job addition of 490,000 compared to the disappointing outcome of 235,000 in the month of August, with the unemployment rate is expected to tick down slightly to 5.1% from the previous 5.2%, as the average hourly earnings are expected to rise 0.4% month over month compared to last month’s 0.6%. A report last week from the Department of Labor showed the number of Americans filing for weekly unemployment aid rose for a second straight week to 351,000, a sign that the market is facing headwinds.

With the Debt-limit showdown intensifying among lawmakers, characterized by political fallout, increased cost of debt, and larger tax burden, analysts fear that October 19 could be a catastrophic day for the United States economy, according to Janet Yellen (United States Treasury Secretary); it is imperative that the congress address the debt limit. If not, our current estimate is that the treasury will likely exhaust its extraordinary measures by October 18. America will default for the first time in history. The full faith and credit of the United States would be impaired and our country would likely face a financial crisis and economic recession as a result.

The key factor more than likely to influence the economy going forward will be the ongoing impact of the Covid-19 delta variant on the United States labor market, how well the government responds with respect to curbing the virus, and enormous relief packages provided by the government to ease the shock of the pandemic on her citizens, coupled with the continued government action in the form of the bipartisan infrastructure agreement should support the economy in the short term and foster even greater productivity growth in the long run.

Economist forecasts that U.S. GDP will grow 5.9%, as the manufacturing Purchasing Manager’s Index notched a 16th consecutive month of growth at 55.0%. though factors such as the spread of the virus, workers shortage, inflation pressure, and supply-chain disruption are offsetting the growth spectrum.

Nevertheless, traders should brace themselves up for a period of high volatility as job reports often have a significant impact on the FOREX market. An increase in jobs will generally strengthen the US Dollar, while a decrease in jobs will generally weaken the US Dollar. Traders should also be aware that volatile markets provide great opportunities for making profits, as an increase in volatility can cause market swings for traders to take advantage of.

The currency pairs that include the US dollar are mostly affected by the data release. The pairs include EURUSD, GBPUSD, XAUUSD, USDJPY, USDCAD, USDCHF, AUDUSD, NZDUSD.

Time Schedule for next NFP release:

Date: Friday, September 10th, 2021.

Time: 1:30 pm (GM + 1)

Francis Idowu is a Forex Dealer, Financial market analyst and writer, Data Analyst, and Financial Market Strategist with a background in Economics. He specializes in market strategies, Forex fundamental and technical analysis, and has spent over two years as a financial market contributor, observer, and trading coach. He is well known for his informative analysis of the global economy, fiat currency, commodities, Stocks, Indexes, Futures, and Options markets. He held a Bachelor's degree in Economics and Diploma in Structured Programming and Data processing.