US Employment Situation Report in Focus

US Employment Situation Report in Focus, FP Markets

Release: July 2nd at 1.30pm GMT+1

Reading time: 7 minutes

Two comprehensive surveys provide economists and investors a snapshot of the employment situation in the United States each month. Through the Household Survey and Establishment Survey—often referred to as the Payroll Survey—both deliver a complete picture of the Labour market.

  • The Household Survey derives data from approximately 60,000 households, led by the Bureau of Census for the Bureau of Labour Statistics, or BLS. The survey includes farm, non-farm, self-employed (unincorporated) and domestic helpers.
  • The Establishment Survey tends to capture the spotlight. Through the Current Employment Statistics (CES), each month the program contacts approximately 144,000 businesses—representing nearly 700,000 worksites—targeting the payroll of non-farm businesses, non-profit groups and government organisations across the United States.

Due to its timeliness, accuracy and importance within the broader economy, the employment situation report is closely monitored.

In most cases, the non-farm payrolls report (taken from the establishment survey) attracts the majority of attention, often vibrating financial markets. A favourable number (generally considered USD positive) reveals additional jobs were added to the economy, while a negative value (often viewed as USD negative), displayed as -100k or -90k, for example, means jobs were lost in non-farm business.

  • June’s US non-farm payrolls is forecasted to have gained in the range of 700,000-800,000, notably higher than May’s 559,000 print. Nevertheless, according to Reuters, forecasts for June’s number deviates from as low as 400,000 to in excess of 1,000,000. It is also worth highlighting the three-month rolling average stands at 540,666, and the six-month rolling average falls in around 374,500.
  • The US unemployment rate is anticipated to have ticked lower 5.6 percent lower in June, following May’s 5.8 percent reading.
  • US average hourly earnings is expected to have dropped 0.1 percentage points to 0.4 percent.

US Employment Situation Report in Focus, FP Markets

(Source: Reuters)

As measured by the Conference Board on Tuesday, US consumer confidence rose more than anticipated in June, advancing 7.3 points 127.3.

‘Consumer confidence increased in June and is currently at its highest level since the onset of the pandemic’s first surge in March 2020’, said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

Of note was consumers’ evaluation of labour conditions. 54.4 percent stated jobs are plentiful, versus 48.5 percent in May (highest assessment since mid-2000). Additionally, the release revealed 10.9 percent of consumers saying jobs were hard to get decreased from 11.6 percent.[1]

US Employment Situation Report in Focus, FP Markets

(Source: Reuters)

Wednesday revealed latest ADP non-farm employment change increased by 692,000 in June, beating 555,000 expectations, though was lower than May’s downwardly revised 886,000 reading[2].

‘The labour market recovery remains robust, with June closing out a strong second quarter of jobs growth’, said Nela Richardson, chief economist, ADP. ‘While payrolls are still nearly 7 million short of pre-COVID19 levels, job gains have totalled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country’.

Another prominent event on Wednesday, of course, was US pending home sales jumped 8.0 percent in May— its largest increase in nearly a year[3]. Analysts expected a minus 1.1 percent drop (following April’s minus 4.4 percent decline).

‘May’s strong increase in transactions – following April’s decline, as well as a sudden erosion in home affordability – was indeed a surprise,’ said Lawrence Yun, NAR’s chief economist. ‘The housing market is attracting buyers due to the decline in mortgage rates, which fell below 3%, and from an uptick in listings’.

US Employment Situation Report in Focus, FP Markets

(Source: Reuters)

Thursday’s initial jobless claims came in better than expected, totalling 364,000 last week, a decrease of 51,000 the week prior. Additionally, according to the Department of Labour, the 4-week moving average was 392,750, a decrease of 6,000 from the previous week’s revised average[4].

Thursday—through the June manufacturing PMI—revealed US economic activity put forward a print of 60.6 percent, displaying a decrease of 0.6 percentage points from May’s 61.2 percent[5].

US Employment Situation Report in Focus, FP Markets

(Source: Reuters)

FP Markets Technical View

Note the US dollar index (ticker: DXY) provides traders and investors a benchmark value—a weighted geometric mean—of the US dollar relative to a basket of six major foreign currencies, including the euro (boasts the largest weighting of approximately 57.6%), Japanese yen, British pound, Canadian dollar, Swedish Krone and Swiss franc. Knowing Europe’s single currency plays a large role in the makeup, EUR/USD and DXY tend to be inversely correlated.

US Dollar Index Technical View:

Monthly timeframe:

June saw the USD advance 2.8 percent—largest percentage gain since late 2016—propelled higher on the back of the FOMC’s hawkish shift mid-month. Market participants, therefore, are likely monitoring the US employment situation report to reaffirm this stance.

From the monthly chart, the technical landscape reveals price trades off trendline support-turned resistance, extended from the low 72.69. Support from 88.55 (aligns closely with a 50% retracement level at 88.28 and a 61.8% Fib at 88.27) remains a reasonable downside objective.

Overall, despite the month of June recording a healthy advance, the major trend is lower (see arrows). Couple this with the trendline support breach, this emphasises a bearish USD market, from a long-term technical perspective.

US Employment Situation Report in Focus, FP Markets

(Source: Trading View—US dollar index monthly chart)

Daily timeframe:

Action out of the daily chart informs chartists Quasimodo resistance from 92.50 was overthrown Thursday, with Friday, as you can see, currently on the front foot by 0.2 percent. Technically, something to bear in mind is that for the Quasimodo to be engulfed, the 93.44 March 31st high must be consumed, a level representing the charts next upside objective.

As for trend on this timeframe, in line with monthly price action, we can see this market was entrenched within a downtrend during 2020. Yet, the DXY’s floor arranged at 89.68 reinforced a bullish presence in 2021, largely confronting the bearish narrative.

US Employment Situation Report in Focus, FP Markets

(Source: Trading View—US dollar index daily chart)

H1 timeframe:

Shorter term, we are currently shaking hands with a 1.272% Fib expansion at 92.70, shadowed by Quasimodo resistance at 92.72 as well as channel resistance, extended from the high 91.88. Also circling the area is a 100% Fib projection at 92.81, which many harmonic traders will know represents an AB=CD configuration.

To the downside, demand is featured at 92.33-92.45.

  • Should non-farm payrolls come in as expected (700,000-800,000), it’s likely we’ll see an indecision candle print on the H1/H4 timeframes.
  • > 900,000-1,000,000, the DXY may spike into H1 demand bids and push north into the close. Ultimately, countertrend sellers out of H1 resistance between 92.81 and 92.70 will therefore likely be squeezed.

US Employment Situation Report in Focus, FP Markets

(Source: Trading View—US dollar index hourly chart)

AVISO LEGAL:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives carry a high level of risk; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

 

 

 

[1] https://www.conference-board.org/data/consumerconfidence.cfm

[2] https://adpemploymentreport.com/2021/June/NER/docs/ADP-NATIONAL-EMPLOYMENT-REPORT-June2021-Final-Press-Release.pdf

[3] https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales

[4] https://www.dol.gov/sites/dolgov/files/OPA/newsreleases/ui-claims/20211252.pdf

[5] https://www.prnewswire.com/news-releases/manufacturing-pmi-at-60-6-june-2021-manufacturing-ism-report-on-business-301323652.html

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