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Market Insights

The Skilling NFP Preview

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Skilling NFP Review for June 03 2022 Release

US Unemployment near 60 Year Lows!

Looking at two pieces of data, US wages growth and US inflation over a 60-year period, indicates that the money people earn normally stays ahead of inflation. Yes, house and car prices 60 years ago were 50x cheaper than today’s prices, but at the same time, wages have always adjusted… Just remember to ask your boss for that raise!

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Summary of current US Labor Market:

  1. The US created +428,000 new jobs in April 2022.
  2. The April Non-Farm Payrolls report showed that employment increased across every sector of the US economy.
  3. Employees are in demand as companies find it harder to keep and recruit employees.
  4. The tight US jobs market is forcing employers to increase wages across the board.
  5. The side effect: higher inflation!

What is NFP?

Every 1st Friday of every new month the US Department of Labor Statistics releases the Nonfarm Payrolls report otherwise known as NFP. This report measures the previous month's employment conditions and is considered by traders and investors all over the world as a key indicator to measure the strength of the US economy on a month-to-month basis.

How to read the NFP report:

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This month's NFP is forecasted for 325,000 new jobs to have been created during the month of May. This forecast is below the April 428,000 number of jobs created during April.

  • If the actual is above the forecast this will be seen as a net positive signal that the US economy is strong and creating more jobs.
  • If the actual is below forecast this may indicate that the US employment market is slowing down because less jobs have been created than expected.

The NFP vs Gold, Brent and the US Dow 30...

Historically a strong US jobs market normally can support the case for higher US stock markets, higher gold and oil prices.

However, a strong jobs market does have its downside risk… more people working and employers having to pay workers higher wages leads to increased inflation. In this type of environment a “not so good” NFP report may be viewed as a positive and a “good” NFP report might even trigger stock investors to sell because of the increased inflation risk. Bottom line for all traders is that they need to read between the lines in order to capture potentially successful trades during NFP day!

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

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