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Tomorrow at 1:30 pm GMT Uncle Sam will print its non-farm payrolls (NFP) report for the month of February.

Planning on trading the event? Here are the points you need to know first:

What happened last time?

  • January NFP: 304K vs. 165K expected, 222K previous
  • December NFP revised lower from 312K to 222K
  • Unemployment rate inched up from 3.9% to 4.0%
  • Labor force participation rate up from 63.1% to 63.2%
  • Average hourly earnings lower from 0.4% to 0.1% vs. 0.3% expected

Uncle Sam added a net of 304,000 jobs in January, which was WAY more than the downwardly revised 222,000 rise in December and the 165,000 addition that analysts had expected.

As if that’s not strong enough, the labor force participation rate improved from 63.1% to 63.2%, which is probably why the jobless rate also ticked higher from 3.9% to 4.0%.

The only dark cloud in the report was hourly wages, which slowed down from 0.1% against December’s 0.4% and expectations of a 0.3% increase.

As you can see in the chart below, the dollar reacted positively to the upside surprises in the NFP report.

USD 15-Minute Forex Chart
USD 15-Minute Forex Chart

However, it wasn’t until ISM printed a surprisingly strong manufacturing PMI that the Greenback’s intraday rally gained momentum.

And why not? Aside from easing recession fears, Uncle Sam’s strong releases also showed the limited impact of the partial government shutdown and the economy’s promising prospect amidst the U.S.-China trade negotiations.

What are traders expecting this time?

  • February NFP to cool down from 304K to 163K
  • Unemployment rate to fall back from 4.0% to 3.9%
  • Avg. hourly earnings to shoot up from 0.1% to 0.3%

After strong readings in January, analysts are expecting February’s numbers to take a chill pill and maybe see downward revisions in last month’s numbers.

The headline NFP is expected to cool down from 304,000 to 163,000 even as average hourly earnings is expected to speed up from 0.1% to 0.3%.

Meanwhile, the unemployment rate is expected to dip back down to 3.9% after hitting 4.0% in January.

Do leading indicators support weaker expectations?

Markit’s manufacturing PMI slid down from 56.6 to 54.2 in February. The employment component didn’t fare much better, as it fell from 55.5 to 52.3 during the month. That’s the slowest since November 2016, yo!

Much like Markit’s data, the employment index of the more closely-watched ISM non-manufacturing PMI also fell a few points from January to February.

Apparently, some respondents felt that “Lower employment makes higher-paying positions elsewhere more attractive,” and that “it is more difficult to find well-qualified workers” for the month.

The ADP report printed earlier this week was a bit more optimistic. While it missed analysts’ expectations of 189,000 job gains, its 183,000 reading was still pretty strong considering that January’s figures were also revised higher from 213,000 to 300,000.

So, it looks like there’s reason to expect a lower NFP reading in February. Can historical releases support this?

Last February NFP Releases
Last February NFP Releases

Based on the last ten February releases, it looks like market players have a tendency to underestimate the headline NFP figures than overestimate them. That means y’all have to be careful before pricing in a lower release this time!