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Tomorrow at 12:30 pm GMT the U.S. will release its non-farm payrolls (NFP) and other labor market numbers for the month of March.

What are traders expecting and how can you trade the event?

Here are factors you need to know:

NFP was shrugged off in favor of coronavirus headlines last time

  • February NFP up by 273K vs. 175K expected
  • February unemployment rate slipped from 3.6% to 3.5%
  • February average hourly earnings up from 0.2% to 0.3% as expected
  • January NFP revised higher from 225K to 273K

As you can see, February’s labor market numbers were generally stronger than markets had expected.

The headline NFP surprised to the upside, January’s NFP was adjusted higher, unemployment dipped, and average earnings rose at a faster pace.

Unfortunately for dollar bulls, traders were only mildly interested in the lagging numbers. At the time, they were more interested in the rising coronavirus cases around the world and its ensuing impact on the U.S. labor market and economy.

USD 15-Minute Forex Charts
USD 15-Minute Forex Charts

USD maintained its intraday downtrends and only saw some profit-taking near the end of the day.

Traders are “only” expecting a 100K net job loss

  • March headline NFP to show 100,000 net job loss
  • March unemployment rate expected to spike from 3.5% to 3.8%
  • March average hourly earnings could slow down from 0.3% to 0.2%

Given last week’s historic jump in initial jobless claims, you would think that traders would expect yuuuge increases in net job losses.

So, why are markets expecting “only” a 100,000 net job loss in March?

Remember that the U.S. Bureau of Labor Statistics reference period for its surveys is “the pay period including the 12th” of each month. In this case, BLS is only reflecting data ending March 12.

That’s BEFORE a lot of states have closed their businesses and public spaces to help flatten the coronavirus curve!

The usual “leading” indicators don’t look too bad

Markit reported that “manufacturers cut their workforce numbers at the sharpest rate since October 2009” and noted that unemployment could spike higher “in the coming months.”

This week’s ADP report, on the other hand, clocked in a 27,000 decrease when analysts had seen a 150,000 drop.

Last but not the least is the employment index of ISM’s manufacturing PMI, which dropped to its lowest reading since May 2009.

Note that ISM’s non-manufacturing PMI, which usually correlates nicely with the NFP, won’t be released until after the NFP numbers are out.

USD is mixed against its counterparts so far this week

A quick look at the majors’ price performances will tell us that the dollar has gained pips against EUR, CAD, CHF, and NZD and has so far lost pips to AUD, GBP, and JPY in the last seven days.

If this week’s numbers print much worse than markets are expecting, then we could see the dollar lose pips across the board as traders speculate on the need (and lack of plans for) another stimulus package from the government.

If the NFP release follows ADP’s lead and only prints limited job losses, however, then we could see some relief for the dollar or maybe even some appetite for the higher-yielding currencies.