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The Skilling NFP preview - February 2023


Monthly US nonfarm payrolls due 1:30 GMT Friday, February 03, 2023

Skilling NFP Preview

US unemployment at risk of increasing by 0.1% during January 2023

The US current unemployment rate is at 3.5% and by the end of this Friday that number could be 3.6%.

January US nonfarm payrolls are expected to increase by at least 175,000 according to our own internal prediction. While the general consensus, as reported across the major financial media, seems to be calling for an increase between 185,000 and 190,000 new jobs created during the month of January.

Whether the actual report is somewhere between our own and the consensus, the fact remains the same. The US labour market continues to remain tight, unemployment is still holding near all-time record lows and average hourly earnings are accelerating.

Key US labor market indicators

  • US nonfarm payrolls fell 15% month on month during November - December 2022 period
  • US real average hourly earnings increased 0.64% during the same November - December 2022 period while,
  • US unemployment fell -5.41 during November - December 2022

Source: US BLS / Skilling


The US employment situation and the risk of a hard recession

The US employment situation appears to be amazing at the moment. With unemployment remaining near only 3.5%, and the fact that US Job openings have not increased significantly during the previous 12 months, leads one to believe that even if the major US economic indicators do take a turn for the worse, with such a strong employment situation, the US seems more than ready to handle any potential economic downturn throughout 2023.

The current US employment situation could very well be near perfect!


Stock Indices can be used as a leading indicator for the strength or weakness of an economy

During the previous 3 months, the major benchmark stock indices from around the world have recorded strong gains.


Upcoming nonfarm payrolls scenarios:

Expected outcome: US nonfarm payrolls record 175,000 new jobs created for the month of January

  • In this baseline case, stock indices could move higher since although 175,000 is below the consensus, it could lead to a slight uptick in the unemployment rate, which some investors may interpret as bullish for stocks since any uptick in unemployment reduces the risk for the Fed to keep on pushing for higher interest rates.

Aggressive outcome: The general consensus is correct and the headline number comes in above 190,000 new jobs created during January.

  • In this case, stock indices could see a sharp and fast correction lower. This would not indicate that the 3-month bull market is over, but that prices may trade within a range for some time before continuing to trend higher again.

Good luck on NFP day and as always, trade safe!

Not investment advice. Past performance does not guarantee or predict future performance.

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