The US non-farm payroll (NFP) report, published by the country’s Department of Labor, is possibly one of the most important factors affecting the US dollar. Given that the Greenback is the most traded currency in the world, forex traders all over the globe are on edge waiting for the release of this announcement each and every month. August’s release will be closely followed by market analysts and traders as recent developments in the trade wars are heavily impacting the major currencies including the US dollar, the Chinese Yuan, the Euro and the British Pound.
Why is the NFP so Important?
Usually released on the first Friday of the month, at 8:30 am EST, the NFP report includes the payrolls of all the non-agricultural businesses in America, which are estimated at about 400,000 businesses. As a key economic indicator, the NFP report provides information about the labour conditions in the United States, including wages and the unemployment rate. If the data is better than expected, it usually leads to a bullish run for the USD, while lower than expected data typically impacts the USD negatively.
The July NFP Report
The last non-farm payroll report was released on July 6, 2018, and provided information regarding the employment conditions in the US through June. The US Department of Labor, via this report, indicated that initial jobless claims fell by 8,000 to 207,000. This was the lowest level since December 1969 and definitely came as a positive surprise, given that the market had been expecting a rise in initial jobless claims to 220,000.
Although job gains were reported in business and professional services, healthcare and manufacturing for June 2018, the unemployment rate rose to 4%, from 3.8% in May. May’s headline figure had been the lowest since April 2000, while June’s figures were above market expectations. Jobs in the retail sector declined in June.
In addition, non-farm payrolls rose by 213,000 during June 2018, well above the market expectation of 195,000. However, this was lower than the upwardly revised 244,000 in May 2018. Wage growth for June was lower than expected, which drove the US dollar down on Friday, July 6, a trend that continued all the way through the following week.
What to Expect from the August NFP Report
The NFP data for July 2018 is scheduled to be released on August 3, 2018, at 8:30 am EST. Non-farm payrolls for July are expected to come in at 191,000, lower than the 213,000 reported for June. The unemployment rate, however, is likely to remain unchanged at 4%.
While the global trade tensions, especially the escalating tensions between the US and China, have already impacted the Chinese Yuan negatively and if the situation worsens, the US non-farm payroll could be impacted as well. This is because America is a gross importer of both raw materials and manufactured goods. The July NFP report already raised concerns with weak wage growth. Therefore, there are concerns whether the August report would also reflect the same, especially if businesses are burdened by raised import tariffs.
Data from June was a mixed bag, which is why the US dollar didn’t suffer as much as it would have if the report had been outrightly negative. If the July data also shows continued job growth, with the unemployment rate remaining unchanged, it could mitigate some of the negative impacts.
On the other hand, the US economy seems to be doing well for now, with June’s data being good enough for the Federal Reserve to raise interest rates in September. Any change in interest rates definitely has a significant impact on the currency market. For now, expectations are broadly bullish but keep a close eye on both the market’s movements and the upcoming NFP report to make informed forex trading decisions.