Today’s economic releases will be important for the economy for at least a few months. FED, despite the fast-rising inflation point the jobs market for tapering and rate increase. Strangely almost all non-voters favor tapering while voters remain dovish within the FED and the last bastion of the doves is a relatively weak jobs market. Because of that today’s data may have a huge impact on the Dollar Index, EURUSD, Gold, Nasdaq, etc. Non-farm payroll change had negative surprises in the last two months, another one will have a bearish effect on the dollar while a huge positive surprise may trigger taper tantrum panic.
Change in non-farm payrolls is expected 720k, which is quite high. Unemployment is expected to lower by two points at the same time labor force participation rate is expected to increase by one point, which if both happen will be a rare sight. Average hourly earnings data will be important too. If it is announced high at the same time with satisfactory employment data, will show further inflationary pressure.
The US economy is still under 7-8 million under the pre-pandemic jobs. It is understandable, after that kind of a shock, it will take a while to get back to the normal economy. But almost all central banks around the globe saying last year that it will take at least 3 years to get back to pre-pandemic levels. Well huge GDP numbers, highest inflation for years change their view in a half year. Despite that employment still has a long way to come back, or is it?
JOLTS, job openings data is at all-time highs by far and extending its record for two months in a row. So there are jobs, right? Why is the jobs market still weak?
There are some different views about the answer to these questions. Inflation increases a lot since the pandemics start and people don’t want to work for already low, same wages. At the same time, unemployment checks under Biden’s fiscal support will remain until the end of September, and households were able to save some money because of the lockdowns. Workers are most likely waiting for the right opportunities while employers are in hard times and don’t want to give high wages. Supply – Demand equilibrium is not yet reached and may take some time but average earning will likely get higher for the rest of the year and that will cause inflationary pressures to continue.
Claims data is supporting this theory as well. Initial claims getting lower because employers don’t want to lose workers because it is getting hard to find new workers while continuing claims change is somewhat steady and not low as expected because workers are not in a hurry.
So how to trade the payrolls data? There is no right answer to this question, especially in the current situation. If we focus on non-farm payrolls. A better than expected data will be in favor of the Dollar Index so, Gold and EURUSD will be expected to fall. But some of those expectations may have already priced in. Another negative surprise may support the Gold and EURUSD. The last two negative surprises cause EURUSD to rise nearly %0.8 and %0.4 and cause Gold to increase around %0.75 on a six-hour period.