NFP Expected at Sub-200k For First Time Since Pandemic

Further softening of the US labour market is expected in the latest NFP data after the Fed signals a pause in its hiking at the next meeting.

Concerns Keep Growing

The Fed probably took the wind out of the sails of NFP data in raising rates by a quarter of a point but heavily hinting that it had hit its peak rate. Following Fed Chair Powells press conference, market makers adjusted their outlook for the rate trajectory, bringing forward expectations of the first rate cut to July. The BLS also reported a drop in job openings earlier in the week, with ADP reporting that wages remained under pressure, with employers aggressively recruiting but not offering better salaries. People who switched jobs got the worst salary improvement since the end of 2021.

Weaker job numbers would likely affirm the narrative of a softening US economy, and it would probably take a substantial beat over expectations to change the directionality in sentiment. ADP figures were well above expectations on Wednesday, but ADP has lost its predictive value for most traders.

Whats Expected

Its expected that the US added 190K jobs last month, down from the 236K reported in March. That would be the first sub-200K figure since the pandemic; analysts have also systematically underestimated job numbers. The unemployment rate is expected to tick up to 3.6% from 3.5%, while average hourly wages are expected to see the same relatively modest monthly growth of 0.3%.

With attention now shifting to when the Fed will pivot, and start lowering rates, the market could be increasingly interested in when the unemployment rate rises above structural level. The number of open jobs still far exceeds the number of people looking for work, but with more companies announcing job cuts, that gap continues to shrink. If the jobs number were to miss expectations substantially, it could have a disproportionate effect on markets already reeling from the latest bank crisis worries.

Wall Street Completed Impulse

For what is worth, the Down Jones finalised a 5-wave impulse to 34260 on May 1st. Typically, two 5-wave structures connected by an intervening correction follow, with the second being the same length as the first. With the first out the way at the 38.2% Fibonacci of 33200, the completion of a pullback higher would provide a potential target. Notably, the golden pocket is settled by 32500, which is a typical target when the first 50wave structure ends by the 38.2% Fibonacci.

If prices rise as high as shy off the previous peak without a breakout, Dow might reverse for the expected second 5-wave structure down. Losing 33000 will open the door to 32850, with a subsequent break exposing 32500. On the contrary, extending past the local top might see bulls reclaim 34500 and make an attempt at the 35k handle.

Source: SpreadX / Wall Street

Key Takeaways

Following the Feds pause in hiking, upcoming NFP data is expected to show further softening of the US labour market. Analysts expect the US to have added 190k jobs last month, the unemployment rate to tick up to 3.6%, and average hourly wages to see relatively modest monthly growth of 0.3%. Weaker job numbers would affirm a narrative of a softening US economy and could affect markets already impacted by bank crisis concerns.