One trading month is already behind us, as today is the last trading day of January. As usual, the price action will be packed around the main fixing hours, and traders use the second half of the day already to prepare for next week.
The NFP report next Friday is crucial. Because the December report came way below the market’s expectations, the focus next Friday is to see if there is a continuation in the same direction – did the U.S. labor market lose jobs in January as well?
If we use the jobless claims as an indicator, there are hopes that the December NFP data was just a one-off. Further clues are needed, and we will have them via the ADP next week (i.e., private payrolls) and the employment component part of the two ISM reports scheduled to be released – manufacturing and non-manufacturing.
UI Claims Fell Last Week
Yesterday’s data showed the Unemployment Insurance (UI) claims to decline. This is positive news because the smaller the number of people applying for unemployment benefits, the better for the economy.
The data released yesterday refer to the week ending January 23rd, and it shows that the UI claims dropped more than expected. They reached 1.30 million (still a staggering number by all means) and the surge seen at the start of the year appears to have slowed down.
For the fundamental trader, it is worth diving into the report and looking for more details. More precisely, to look to the initial and continuing claims and see if there is a change in their trend. As the report shows, the initial claims decreased by 67k, meaning that fewer people applied for unemployment benefits. Coupled with the fact that continuing claims fell as well, reaching 4.8 million on a seasonally adjusted basis, the data fuels hopes that the December jobs loss was a one-off.
Fundamental traders are well-aware of the fact that the jobs data is a lagging indicator. Effectively, it means that it will show positive signs way after the economy reached the bottom. However, sometimes it is difficult to spot the lowest point in an economic recession due to various conflicting signs.
Therefore, traders pay additional attention to any information on the labor market that may hint at the economic recovery being underway. Will next week’s data confirm the positive news we saw yesterday?