NonFarm Payroll Tomorrow – IBFX Poses Estimates

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NonFarm Payroll (NFP) has almost always been a big candle mover. IBFX emails the estimates on loss of 50 – 60K of payroll jobs.

Although April marked the fourth consecutive month of nonfarm payroll decline in the U.S., the 20,000 loss was a far cry better than the 75,000 economists were bracing for. Following declines of 81,000 in March and 83,000 in February, the latest decrease was led by declines in construction, manufacturing, and retail trade.

While revisions to previous payroll numbers were on the down side, they were nevertheless relatively minor. The initial March estimate of an 80,000 drop was revised down 1,000, while February’s estimated decrease of 76,000 was revised down 7,000.

The dollar extended gains against major currencies on Tuesday after the Commerce Department reported that new orders at U.S. factories rose surprisingly in April at a sharper-than-expected 1.1 percent, countering Wall Street economists who had forecast that orders would decline by 0.1 percent. The rise in April’s factory orders followed an upwardly revised increase of 1.5 percent in March orders that previously was reported as a 1.3 percent gain.

In recent remarks to the International Monetary Conference in Barcelona, Federal Reserve Chairman Ben Bernanke issued a warning on the risks that a weak dollar poses for inflation, but was quick to declare that U.S. interest rates are “well positioned” for an economy facing both price pressures and threats to growth.

The downward pressures on the dollar “have contributed to the unwelcome rise in import prices and consumer price inflation,” Bernanke said. “We are attentive to the implications of changes in the value of the dollar for inflation and inflation expectations, and will continue to formulate policy to guard against risks to both parts of our dual mandate, including the risk of an erosion in longer-term inflation expectations.”

Bernanke said GDP growth in the first quarter was “apparently positive,” and that there “may be somewhat better conditions” in the second half of 2008, due in large part to the combined effects of the Fed’s rate cuts and the fiscal stimulus package.

In his remarks, Bernanke essentially left the Fed’s economic outlook unchanged and followed other recent Fed officials in indicating no desire for additional rate-cutting.

Several key factors are thought to have influenced the April NFP report. They include:

– Household employment jumped 362,000 in April while the number of unemployed fell 189,000.

– Average hourly earnings rose a very modest 0.1 percent in April, which came in well below the market forecast for a 0.3 percent gain.

– The civilian unemployment rate slipped to 5.0 percent from 5.1 percent in March and came in better than the consensus forecast for 5.2 percent.

For week ending May 24, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 372,000, an increase of 4,000 from the previous week’s revised figure of 368,000. They also reported a four-week moving average of 370,500, a decrease of 2,500 from the previous week’s revised average of 373,000.

What is NFP?

Of all the world monthly economic reports, the monthly US NFP report is the most highly anticipated and has the most dramatic impact on the currency market.

The report, which is released on the first Friday of each month and states the previous month’s numbers, provides detailed industry data on employment, hours and earnings of workers on nonfarm payrolls. These numbers are the best way to gauge the current state of the US market as well as the direction that the economy is heading.

What’s more, the employment numbers provided by the report are used by the Fed to shape their interest rate policies. The health of the US economy and interest rates translate to the strength or weakness of the US dollar.

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