NFP Expectations

Investors focus this Friday on the Non-Farm payroll data release for the month of August. With a forecast of 720K jobs to be added compared to July’s 943K job figure. The NFP report plays a major role in price movements in the market. As it’s used as an indicator of the overall economic activity and consumer spending.

Why is it so important?

If we go back in time, we’d recall that the Federal Reserve has been projecting signals for tapering and shifting their policy once the labor market recovers as inflation concerns loomed in. Therefore, Improvement in the Job market will prompt the Federal Reserve to proceed with cutting back on their pandemic era bond-buying program.

And in the case of disappointing figures, this would suggest a delay to the Fed’s tapering plans. Markets are leaning heavily towards lower expectations as the ADP private payrolls continue to disappoint. However, from what we have seen last month, ADP and NFP are not always correlated if ever.

Investors also anticipate central banks around the world to hop onto the change of policy wave waiting for clues that will create major price movements in the market. Meanwhile, in the equity market, the Nasdaq closes once again at an all-time high benefiting from lower interest rates. Big techs have been on a winning streak for the past week including Facebook, Microsoft, and Google parent Alphabet.

Other major indices continue to make their way to the top too. With the S&P 500 closing at a record peak as well. And in Commodities, the yellow metal has been steady ahead of the NFP report with only a little time to move sharply according to the widely anticipated figure.