US jobs report preview: questions remain despite Trump’s promises

Friday’s US jobs report looks at risk given the recent ADP and jobless claims figures. Yet with Trump promising a big number, markets will be watching closely

The August US jobs report provides us with another opportunity to take a deep dive into the economic recovery that is underway after the historic coronavirus-induced economic collapse that took hold in the early part of 2020.

With volatility often near guaranteed, traders will be keeping a close eye out for the jobs data which will be released at 1.30pm on Friday 7 August.

ADP miss sounds warning for headline NFP release

The US jobs outlook has been improving over recent months, with the shocking -20 million payrolls figure for April being followed up by two months of job growth (totaling 7.3 million).

With plenty still unemployed from this pandemic, there is a hope that this is just the start of that ‘V’ shaped recovery. US President Donald Trump would certainly have you believe that we are going to see strong data come Friday, with the President claiming on Fox news that Friday would bring a 'big jobs number'.

However, we are seeing some signs that this economic recovery could already be stuttering if other jobs data is to be believed.

Firstly, we have seen a shift in direction in jobless data, with the last week finally seeing both initial claims and continuing claims rise for the first time since March.

That shift highlights a clear end to the improvements we have been seeing for the past three to four months. Unfortunately, that shift appears to be have had an effect upon the ADP non-farm payrolls (NFP) figure released today, with the release posting an underwhelming 167k (against the 1.2 million expected).

The caveat to that release is that we did see a whopping two million upward revision to the June ADP figure. Nevertheless, there are plenty of question marks around the upcoming NFP figure despite Trump's claims.

Given the weakness seen on the jobless claims figures, an underwhelming payrolls figure could bring to light the potential that the recovery has already stalled. Markets are currently looking for a figure closer to 1.8 million, compared to the 4.8 million reading last month.

Another key area of focus will be the unemployment figure, which is forecast to drop for a third consecutive month (10.5% expected from 11.1%).

With continuing claims now starting to rise, there is a chance we will see the decline in unemployment ease and potentially reverse. Of course much will be reliant on the ability to implement a new coronavirus bill, but as things stand the US economy is looking at risk if such a package cannot be agreed.

Finally, average earnings are expected to drop by another 0.5%, following a sharper decline of -1.2% month on month (MoM) last time around. To a large extent the average earnings figure reflects the types of jobs which have been impacted, with the closure of the services sector driving average earnings upward.

However, as long as we continue to see the monthly figure fall, it is indicative of a services sector that is coming back online.

S&P 500 technical analysis

Looking at the S&P 500, we have seen a continuation of the wider uptrend coming into play once again this week, with the index hitting a fresh five-month high. This is likely to continue as things stand, yet a weak jobs report could start to hurt US stocks.

With a poor jobs figure unlikely to improve the policy picture, markets are likely to take data at face value. As such, a bullish trend is in play here, where a break below the 3278 level would start to raise questions over the short-term outlook.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.