NFP Preview: Is the US Job Market Finally Weakening?

June 7, 2024 11:21 am

NFP Preview and US Dollar Analysis

Non-Farm Payroll Data Expected to Drop in May

The main event for the week is upon us as non-farm payroll is expected to bounce back slightly from last month’s disappointing print. In April, US jobs came in way below what was expected – providing the first real sign of weakness in the labour market despite months of restrictive monetary policy filtering through the economy. The April data was the first real shock to the labour market as all prior data beat market estimates this year. As always, keep an eye on any revisions to last months print when May’s NFP figures are released this afternoon.

US NFP Actual (yellow) vs Estimate (blue)


Source: Refinitiv, prepared by Richard Snow

The expectation is for 185 thousand jobs to have been added in May, which is some way off the 315k jobs added in the month of March but represents a marginal recovery from April. The unemployment rate is expected to remain steady at 3.9%.


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This Week’s Jobs Data Leans Towards a Softer Print

If this week’s labour data is anything to go by, NFP could lean slightly towards the lower side of the 185k estimate with the range of potential outcomes rather wide, between 120k and 258k. Naturally, markets will be on the lookout for a any sizeable deviation from the forecast as this tends to spur speculative activity on the back of the implications the data may have for interest rates or the wider economy. Private payroll data disappointed

Job openings were trimmed back, nearer to the 8 million mark – suggesting businesses have tapered their demand for labour – while job quits rose slightly. Job quits usually provide a gauge of nervousness within the labour market as workers tend to quit when they feel their prospects of finding suitable employment elsewhere are manageable and tend to stay in their current position when companies institute hiring freezes. In addition, the National Federation of Independent Business (NFIB) survey continues to show a declining willingness of firms to hire additional workers:

NFIB Percentage of Firms Planning to Increase Employment


Source: Refinitiv, prepared by Richard Snow

On a broader macro level, US data appears to have turned the corner with ‘US exceptionalism’ well and truly a narrative of the past. US GDP growth for Q1 was revised lower after already massively missing the mark. Q1 GDP stands at a meagre 1.3% after initial estimates of 2.6% and the Atlanta Fed recently tracked Q2 growth at 1.8% (annualized).

Other data points like manufacturing PMI and inflation have all turned lower. One standout continues to be the services sector as those PMI figures suggest a continued expansion in the most important sector in the US.

US Dollar Snapshot Ahead of NFP: Weekly Low Comes into Sharp Focus

The US dollar got off to a bad start at the beginning of this week and yesterday’s hawkish ECB rate cut lifted the euro – placing the dollar index on the back foot once again. Disappointing US data continues to weigh on upside potential but markets still don’t fully price in two rate cuts this year but should the data worsen, that is still very much a possibility.

Ahead of NFP, this week’s low comes into focus at 104 flat. The US dollar index carries a high weighting in EUR/USD meaning the hawkish cut yesterday has weighed on the greenback with the move maintaining the potential of an extended move lower is the NFP figure misses the mark or the unemployment rate rises to 4% or above. 103 naturally becomes the next level of support but the decline may not be a fast one since inflationary pressures have dented the Fed’s confidence that we are on the path to 2%. A beat in the NFP number would need to be sizeable to propel the dollar higher, given recent disappointing data but the 200 SMA at 104.43 remains as resistance followed by 104.70.

US Dollar Basket (DXY) Daily Chart


Source: TradingView, prepared by Richard Snow

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— Written by Richard Snow for

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