Slower jobs growth expected

BY Janne Muta

|April 7, 2023

Based on the recent employment-related data, it is difficult to determine how strong the NFP number will be and how it might impact inflation, the Fed and the dollar. While the ADP report indicates a slowdown in the economy and a decline in pay growth, the JOLTS report shows that businesses may need to offer higher salaries to retain employees, which can lead to increased labour costs, and contribute to inflation.

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However, the ISM services PMI suggests a pullback in new orders growth rate over various industries, which may indicate a decrease in the employment growth rate. The initial claims data also indicate that the labour market is slowing.

US job growth is expected to slow down moderately in March. However, even if this happens, the pace of job creation is predicted to remain relatively strong. In February the payrolls report surpassed market expectations by 311K new jobs and the analysts were once again too careful in their estimations. This was consistent with their pessimistic predictions over the last 11 months.

The analyst consensus expects to see 236K jobs and it’s easy to say that in light of the past data, the NFP number is again likely to be better than predicted. The manufacturing and construction sectors are anticipated to lead job gains, with the service sector also showing signs of recovery.

ADP Report

According to the ADP report this week, the jobs market added 145K jobs in March. At the same time, annual pay was up 6.9% YoY. While the report is based on anonymised payroll data for over 25 million employees but often predicts the official NFP report quite poorly. Overall, the ADP report indicates a slowdown in the economy and a decline in pay growth. Should this turn out to be the case we are likely to see less demand for the USD as investors would expect the Fed to slow down the rate hikes.


According to the JOLTS report, job quits in the US increased by 146K to 4.02 million in February. While this was lower than the record high of 4.5 million quits in November 2021, it was still high enough for businesses to consider offering higher salaries to retain their employees. The increase in job quits reported in the JOLTS report can have an impact on inflation and therefore on the dollar. If businesses need to offer higher salaries to keep their workers, this can lead to increased labour costs, which then usually is passed on to consumers. This can contribute to inflation and support the USD. However, please remember that the JOLTS report only one of the multiple factors impacting inflation.

Initial claims

In the week ending April 1st, initial claims dropped to 228K from 246K. This indicates a decrease of 18,000 but the previous week's initial report of 196,000 was revised sharply upwards to 248,000 due to methodology changes. The annual revisions to the data show that applications were higher this year than initially thought, indicating that the labour market is slowing.

ISM services PMI

The ISM services PMI came in well below the previous reading. The index was confirmed at 51.2 in March (55.1 in February), Albeit, this marks the third consecutive month of expansion for the services sector the reading was significantly lower than in February. This was due to a pullback in the new orders growth rate over various industries. According to the report, 13 industries reported growth in March, while five industries recorded a decrease in the same month.

As the recent data doesn't give clear direction, I’m not making strong predictions in one way or another. It seems that the jobs growth could be slowing down further but the most important thing for us as traders is the deviation from the expectation and the earnings data.

We want to see volatility. The possibility of extraordinary price moves is bigger though as the markets are significantly less liquid today. Due to Good Friday, most traders and investors around the globe are off today. So, if we get a surprisingly high or low NFP number the markets probably provide us with great trading opportunities.

A number of markets are closed today which has resulted in this being a quiet day in Forex also. However, due to substantially less liquidity available in the markets today, strong deviations from the expected NFP number are likely to create higher-than-usual volatility.

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After trending higher EURUSD is ranging sideways. A break below 1.0880 would probably move the market to 1.0850 at first and then possibly to 1.0780 on extension. Above the 1.0880 level, the market is likely to move to 1.0970. If the level is taken out then we might see a move to 1.1020.

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Cable is trading at the January high. The market remains bullish above 1.2400. Should the support break, look for a move to 1.2330 and then to 1.2260 on extension. Above the 1.2400 level, we should see a rally continuation to 1.2524 and then possibly to 1.2600.

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USDJPY has created a higher low in the daily chart. This is bullish and could provide bids for the market but the reaction to today’s NFP number is going to be even more important. Technically though the market remains bullish above 130.60 and could trade to 133 or so at first and then to 133.80 on extension.

The Next Main Risk Events

  • USD Average Hourly Earnings m/m
  • USD Non-Farm Employment Change
  • USD Unemployment Rate

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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