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We’ve got the blockbuster U.S. NFP release this Friday! If you’re planning on trading the event, here are the key points you need to know.

Jobs data surprised in October

  • U.S. economy added 638K jobs in October vs. 595K consensus
  • September NFP reading was upgraded from 661K to 672K
  • The unemployment rate improved from 7.9% to 6.9% vs. 7.7% consensus
  • Average hourly earnings posted a 0.1% uptick after an earlier flat reading
  • Labor force participation rate rose 0.3% to 61.7%

The October NFP release turned out mostly much better than expected as the headline jobs figure beat expectations while the September figure enjoyed a nice upgrade from 661K to 672K.

To top it off, the unemployment rate fell by a full percentage point to 6.9% as the number of unemployed folks declined for the sixth consecutive month.

Underlying data suggests that the improvements were mostly due to several states and businesses reopening thanks to a slowdown in COVID-19 cases. This is based on the 0.3% pickup in the labor force participation rate and the reduction in temporary layoffs.

USD 15-min Forex Charts
USD 15-min Forex Charts

Slower jobs growth expected in November

  • November NFP reading expected to come in at 500K
  • November unemployment rate likely dipped from 6.9% to 6.8%
  • Average hourly earnings to post another meager 0.1% uptick

Based on the market consensus, traders are expecting a slower pace of job creation for the previous month. Only 500K in hiring is projected, possibly still allowing the jobless rate to fall to 6.8% in November.

Leading indicators are yet to be printed, although it’s worth noting that most are all pointing to an employment slowdown.

The ISM manufacturing PMI is slated to drop from 59.3 to 57.3 while the non-manufacturing component could fall from 56.6 to 56.0. Keep in mind that this downturn in business expansion likely stems from new lockdown measures imposed during the month.

Weekly initial jobless claims have also been picking up as fiscal support has been fading. The latest reading reflected a 778K rise in first-time unemployment claimants, missing the consensus for three out of the past four weeks.

On a less downbeat note, the ADP private payrolls report is expected to show stronger job gains of 415K in November compared to the earlier 365K figure.

Part-time hiring for the holiday spending season might have also contributed to additional employment, although wage growth might not be so impressive.

USD may have a muted reaction

With analysts already setting the bar low for jobs data, worse than expected results could spur USD weakness as traders price in stronger odds of additional Fed easing before the end of the year.

Note that the November FOMC meeting minutes contained some hints that the central bank could be open to increasing asset purchases if the economy continues to reel from rising COVID-19 cases.

Then again, with upbeat developments on the vaccine front, dollar traders might be open to overlooking weak jobs data in hopes of seeing a strong hiring rebound later on.

In addition, positive expectations for the Biden administration’s COVID-19 game plan could also keep market participants looking ahead to the jobs reports early next year instead.