How would the markets waltz around the nonfarm payrolls? New year, same old?

With a “soap opera” kind of drama for the American markets, which started with the US-China talks and ended with Trump’s impeachment – everybody’s waiting for another Star to show up with a plot twist; the nonfarm payrolls. The expectations and the actual numbers will give the markets a wider view on how healthy was the American economy over the year of 2019.

Last month’s payroll passed all expectations, a rise of 180,000 jobs were predicted yet the actual numbers rose to 266,000. A figure that indicates that the US labour market is in a solid condition. It is the best since 1969, with an unemployment rate as low as 3.5%. Something might be working just fine in Trump’s administration.

Yet again, are these figures enough for us to turn on the music and start partying our way to 2020?

Even if the numbers exceed the expectations one more time, the full picture can’t be finalised by nonfarm payrolls figures on its own. To have a genuine idea on the rise or fall of Americans spending power, we will need to link the numbers to another indicator in the same report which is the average wage per hour, as well as connecting those data to the inflation rate report.

And that’s only the beginning! But let’s dig deeper into that first.

For over a year now, the Fed’s inflation target still far away from the current percentage is 1.0% vs a target of 2.0%. An issue hard to control, especially post the 2009 recession; when the Federal reverse went for quantitative easing through bond-buying programs which created an “artificial” boost for markets, and for now, we’re unable to detach its effect to analyse genuine data.

As for the average hourly wages, a great sign was seen last November with an all-time high of 23.83 USD per hour. But, if we take a closer look, these reports are not all cheerful. For example, the unemployment rate hasn’t decreased fairly for all Americans. On the contrary, for some groups, it has been increased. The unemployment rate for African Americans and Hispanics has risen to 4.2% and 5.5% respectively.


Most likely, the readings for December 2019 will range around an average of 168 thousand jobs, as for the average wage growth rate it will likely remain steady around the level of 3.1% annually. Achieving these numbers is necessary to trust that the performance, of a strong and steady, the American labour market is maintained throughout the year. A much-needed sign for the Feds to keep their monetary policy fixed and stable.

Information provided by ATFX (AE) Head of Market Research: Ramy Abouzaid

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