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The U.S. jobs report for April should give a better picture of how the COVID-19 pandemic affected the labor situation in the country. Better not miss this one!

If you’re hoping to catch some pips from this top-tier catalyst, better read up on what this report is all about, how the previous release turned out, what market watchers are expecting, and how the dollar might react.

What is the NFP all about?

NFP is short for non-farm payrolls, which accounts for the monthly change in the number of employed people outside of the farming industry.

This is a pretty huge deal for traders since 1) job creation is seen as a preview of consumer spending and 2) it is one of the earliest major U.S. economic reports released for the month.

Apart from the actual NFP figure, market participants also pay close attention to the unemployment rate, average hourly earnings, and any revisions to previous data.

For more on what employment reports are and why they’re important, check out this crash course on “What the Heck are Jobs Reports and Why Should I Care?

What happened last time?

  • March NFP printed a 701K loss in hiring vs. projected 100K drop
  • March unemployment rate jumped from 3.5% to 4.4% vs. 3.8% estimate
  • Average hourly earnings rose by 0.4% vs. 0.2% consensus
  • Labor force participation rate down from 63.38% to 62.72%
  • February NFP reading was upgraded from 273K to 275K

The March U.S. jobs report already included some of the repercussions of the coronavirus contagion on the economy, resulting in a much worse than expected 701K drop in employment.

Not only did this mark the first negative NFP read since 2010, but it was also enough to send the jobless rate higher from 3.5% to 4.4%, surpassing the projected 3.8% figure.

Underlying figures revealed that the losses were mostly in the leisure and hospitality sector, particularly among restaurants and bars. Layoffs were also reported in health care and social assistance, professional and business services, retail trade, and construction industries.

On a less downbeat note, the average hourly earnings index posted a 0.4% increase in wages, a tad higher than the projected 0.2% uptick and the earlier 0.3% gain.

What’s expected for the April jobs report?

  • April NFP to show a loss of 21 million jobs
  • April jobless rate to skyrocket from 4.4% to 16%
  • Average hourly earnings to show a 0.3% uptick

YIKES!

Number crunchers project that 21 MILLION Americans lost their jobs last month as efforts to contain the outbreak were ramped up, resulting to more business closures and disruptions in services.

Let’s take a look at some leading indicators to see if the actual figure would hit the mark:

Weekly initial jobless claims have actually reached roughly 30 million since mid-March, which was roughly when strict quarantine measures were put in place.

The ISM manufacturing PMI for April slid from 49.5 to 41.5 to reflect a deeper contraction in the industry, but it was still slightly better than the projected 36.7 figure. Its jobs component slipped 16.3 points from 43.8 to 27.5.

The non-manufacturing version of the ISM survey is still up for release within the week, followed by the ADP non-farm employment change figure. Similarly downbeat results on these releases could hint that the headline NFP figure might fall short of estimates, so stay tuned!

How might the dollar react?

Based on the Greenback’s reaction to the actual figures, it seems that traders have been expecting to see disappointing results all along!

Overlay of USD Forex Pairs: 15-min Charts
Overlay of USD Forex Pairs: 15-min Charts

The U.S. currency even started rallying against most of its peers prior to the release as some safe-haven demand came in play.

From there, most pairs simply stayed in their ranges, with the exception of USD/CAD that dipped slightly before making another leg higher.

Perhaps this muted reaction was mostly due to traders saving their gasps for the April figures, which would show the full scope of the coronavirus lockdowns. After all, the March total only accounted for payroll data until the week ending March 14.

Then again, keep in mind that dollar pairs have been extra sensitive to weekly jobless claims data recently, which suggests that some of the bearish impact may have already been priced in. Still, a much larger than expected drop in hiring could spur further dollar weakness.

In any case, make sure you practice proper risk management when trading this major market mover!