Market Insights

The Skilling NFP Preview - November 2022

Skilling Writers Team
2022-11-02
- NFPs
- Trading

United States Non-farm Payrolls

The US unemployment rate at 3.5% remains near all-time lows.

Commentary: Flashback to April 2020 when US unemployment hit nearly 15%, the highest in recorded history. The COVID-19 outbreak crushed the workforce during this period and in April 2020, US year-on-year inflation stood at just 0.3%. Flash forward to September 2022, the US unemployment rate is at 3.5%, and inflation stands at 8.2%.

In just 28 months, the United States recorded an -11.5% drop in unemployment. In fact, it's safe to say that the US is as close to full employment as it's ever been.

Aggressive government and central bank intervention during the COVID-19 outbreak kept economies afloat, and the spike in consumer prices seen today is the side effect of those aggressive actions during those very uncertain times.

The current US inflation rate is 8.2%.

Is higher unemployment the remedy for high inflation?

Aggressive monetary policies are sometimes needed in order to save an economy. It seems that central banks have a plan to cool inflation and restore price stability.

This plan involves increasing interest rates to the point that companies will have to hold off hiring new employees, lay off current employees, and in general slow down the economy.

A strong October Non-Farm Payrolls release is not what a central banker would want to see during a period when you're fighting ever higher consumer prices.

The current US job openings (JOLTs).

Is the US labor market cooling off?

Tuesday’s latest US JOLTs report (Job Openings and Labor Turnover Survey) saw 10.7 million job openings in the US, which was higher than the previous month’s 10.3 million openings.

Based on the recent JOLTs release, there seems to be little evidence that the US jobs market is cooling off.

US stock markets performing well since the previous US Non-Farm payrolls

- The Energy sector outperforms all other sectors by a very large margin - The financial, health care, and consumer staples sectors provided investors with positive returns during the last 30 days of trading

Below is a table of the various S&P sector indices performance from October 1st to November 1st, 2022.

Sector	Index Last Price	1 Month %
S&P 500 Energy	689.83	24.84%
S&P 500 Industrials	797.71	13.86%
S&P 500 Financials	563.91	11.80%
S&P 500 Health Care	1,546.64	9.59%
S&P 500 Materials	466.12	8.97%
S&P 500 Consumer Staples	757.25	8.83%
S&P 500 Index	3,871.98	7.99%
S&P 500 Information Technology	2,241.13	7.75%
S&P 500 Utilities	339.18	2.00%
S&P 500 Real Estate	230.25	1.91%
S&P 500 Consumer Discretionary	1,124.52	0.20%
S&P 500 Communication Services	161.86	-0.09%

The US Non-Farm Payrolls

The U.S. nonfarm payrolls are forecasted to show that between 200,000 - 240,000 new jobs were created during October. If this is the case then October would have created fewer jobs than the 263,000 new jobs that were created during September.

Since inflation is an ongoing concern, any signals that the US jobs market is “cooling” may be deemed as “good” news for certain parts of the financial markets.

The October Non-Farm Payrolls (NFP) is due on Friday November 4, 2022

Date & Time	Country	Event	Previous	Forecast	Current Unemployment Rate
Nov 4, 2022 12:30 PM GMT	United States	Nonfarm Payrolls (NFP)	(September) 263,000	(October) 200,000 to 240,000	3.5%

How will the October Jobs data affect the EUR / USD during the month of November?

EUR / USD to trend higher since the ECB is still way behind the FED on rates?

Commentary: EUR / USD: the pullback over the previous four trading days seems corrective from the +2.6% 30-day increase; the break above the 0.9820 level could provide a solid floor and potentially may have triggered a bull market signal; provided price can remain above the key support at 0.9820 the prospects for an advance towards the 1.02s cannot be ruled out over the short term (5 to 26 days).