US labor market set to add 200k jobs as March Nonfarm Payroll nears

Data current as of 3/5/2024

Key points

• What are Nonfarm Payrolls?: (0:45)
• Payrolls influence unemployment rate: (2:38)
• US jobs have been hotter than expected: (3:50)
• Dollar can move drastically on job data: (5:16)
• US rates also react to employment: (7:14)

What are Nonfarm Payrolls?

Nonfarm Payrolls (NFP) is a crucial employment statistic reflecting the number of jobs added in the U.S. each month, exclusive of farm workers. Covering about 80% of the workforce in the U.S. that contributes to the GDP, NFP data is pivotal for traders to understand the labor market's momentum. This statistic is closely monitored as it provides valuable insights into the economic health of the country, influencing monetary policy decisions and market sentiment.

Payrolls influence unemployment rate

The Nonfarm Payrolls report has a significant impact on the unemployment rate; generally, when NFP numbers are high, indicating job growth, the unemployment rate tends to decrease, and vice versa. This inverse relationship serves as a gauge for economists and traders to assess the overall labor market condition, influencing investment decisions and policy-making. Traders tend to view Nonfarm Payrolls as a short-term indicator, and unemployment as longer term.

US jobs have been hotter than expected

Recently, NFP figures have consistently exceeded expectations, indicating a robust U.S. job market. For example, payroll numbers nearly doubled the predicted figures in December and January, suggesting an economic strength that surpasses analyst forecasts. This unexpected growth boosts consumer confidence and spending, further fueling the economy. The upcoming NFP report is expected to describe 200,000 added jobs in February.

Dollar can move drastically on job data

NFP releases can have a profound impact on currency valuations, evidenced by USD/JPY appreciating significantly - up over 1.3 - the day January's NFP data surpassed expectations. Such movements underscore the sensitivity of the Forex market to employment data, as investors recalibrate their positions in response to the economic outlook suggested by NFP figures.

US rates also react to employment

Employment data not only influences the forex market but also affects interest rates. For instance, 10-year Treasury yields hitting year-to-date highs following a strong January job report illustrates how positive employment figures can lead to heightened expectations for inflation and subsequent rate adjustments by the Federal Reserve. This connection highlights the ripple effect NFP data can have across various financial sectors.

How to trade economic events

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Research expectations surrounding data releases
4. Open, monitor, and close positions on forex pairs

Trading forex requires an account with a forex broker like IG. Many traders watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like IG’s YouTube channel. Our curated playlists can help you stay up to date on current markets and understanding key terms. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.