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US jobs report preview: will the recovery continue to build after March stimulus boost​​​​​

Friday’s US jobs report is widely expected to bring payrolls closer to one-million, but how much of the recent gain was down to the recent $1.9 trillion stimulus package?

The April US jobs report is due to be released at 1.30pm, on Friday 7 May. Coming in the midst of an economic recovery, this is the latest opportunity for the US economy to show just how the recovery is progressing at the hands of widespread stimulus and lessening Covid-19 restrictions.

Last month did see a substantial resurgence in the headline payrolls figure, yet markets exhibited a degree of skepticism over whether that rise heralded the beginning of a massive economic rebound.

Instead, the 916,000 growth in non-farm payrolls appeared to highlight the impact of US President Joe Biden’s $1.9 trillion coronavirus stimulus package. This time around traders are looking to see if the impressive progress seen last month can be sustained and built upon.

That jobs report will be released at 1.30pm UK time on Friday 7 May.

What do other employment readings tell us?

Markets are optimistic about the forthcoming jobs report, with the headlines payrolls figure predicted to move closer towards the one million mark. However, things have been a little more mixed when looking at some of the tier two employment gauges released in the lead up to Fridays report.

Firstly, we have Wednesday’s automatic data processing (ADP) payrolls figure, which gained ground yet fell short of expectations at 742k (up from 565k). While the relationship between the ADP and headline payrolls figure has been questionable, they do often move in the same direction.

Another pair of notable reports come from the Institute of Supply Management (ISM), with the manufacturing and non-manufacturing purchasing managers index (PMI) surveys providing employment components that can be helpful for understanding the direction of travel.

On this occasion, the non-manufacturing employment component rose from 57.2 to 58.8, whereas the manufacturing PMI employment reading came in sharply lower at 55.1 (from 59.6). This evidently signals a weakening in the rate of growth in employment in manufacturing for April.

Finally, from a jobless claims perspective, we have seen a welcome decline over recent weeks. Last weeks figure of 553k resulted in a three-week average of 559k. That is well down on the 721k averaged over the four-weeks of March.

What is expected?

There are high hopes following a blockbuster report last time around. On the payrolls-front, economists are forecasting a rise from 916k to 990k.

Crucially, that brings about a possibility of a rise through the one-million mark, which would likely grab the headlines if broken. The unemployment rate is also expected to continue its improvement, with a reading of 5.8% after the March figure of 6%.

Finally, the average hourly earnings figure is expected to rise to 0%, following the decline into negative territory last time around (-0.1%).

Remember that a decline in average earnings can often reflect the rise in employment for the often locked down services sector which often can carry lower base salaries in favour of gratuity payments.

Dollar index technical analysis

The dollar index has trading within a notable zone of historical support and resistance of late, with price attempting to regain ground following that initial dip below 89.71.

This 87.93-87.91 zone has been crucial as a source of reversals and breakouts. As such, it makes sense to watch the dollar closely to ascertain whether we break or reverse from here.

From an intraday perspective, the four-hour chart highlights how we are already seeing the crack appear in this bullish case. The initial break through 91.10 did appear to herald the beginning of a bullish phase. However, with price falling back, a break below 90.83 could start to see that recovery unravel already.

As such, the key thing to watch from a dollar perspective is whether we rebound or break below 90.83 given the connotations it brings for the ongoing trend.

DJIA technical analysis

The Dow Jones has been consolidating of late, but signs have emerged that we could be on the cusp of a bullish surge. With a long-term bullish outlook in play, there was always a strong chance that we see an upside exit from this recent range.

The recent push through 34251 brings exactly that, with bullish positions favoured unless we see a break back below the 33718 support level.

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Non-farm payrolls report

Discover how the non-farm payrolls report affects the American markets ahead of the next announcement on 1 November 2019.

  • Which markets could become more volatile after the NFP report?

  • Why was the report introduced and what does it really tell us?

  • Why is the report important for traders?

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