By Eliman Dambell
Every first Friday of any new month is expected to create volatility in financial markets. The reason for this is that this is when US Non-Farm Payroll numbers get released. The NFP shows the market how many jobs have been added to the world’s largest economy from the previous month. The number to be released tomorrow will be one of the first insights into the magnitude of the impact the Coronavirus pandemic has had on the economy of the United States.
As the country was effectively placed into lockdown as the virus rapidly spread across most major states, this took a huge toll on the jobs market. It was reported that a record 3.3 million people claimed to be jobless as the lockdown of the country, and the closure of businesses meant workers were effectively forced to “stay at home”.
Taking the above into consideration, tomorrow’s jobs number is set to be one of the most anticipated in recent years, if not historically. Many expect this to really highlight the state of the economy and the damage many may have to endure for the foreseeable future. Below we look at the projected number and the financial markets most likely to move because of it.
What is the expected number?
Traditionally the forecasted number is an average of the general speculation from market makers. These are the large banks, hedge funds and finance experts who share their view on what could be announced. Usually this number is always positive and highlights the number of jobs added. For example if the forecast number is that 50,000 jobs will be added, but 75,000 is the actual number, this is typically positive for the US economy. If the number comes in lower than expected, many believe this shows weakness in growth.
Tomorrow’s number has been forecasted to come in at around -100,000 jobs. Meaning a significant loss of jobs. This is the first time in recorded history the number has been at this level. So what does this mean, and which markets stand to lose or gain from such a number?
What markets could this impact?
Gold is often seen as one of the main markets impacted by volatility surrounding the US. Generally when we see panic and uncertainty in US related markets, Gold traditionally acts as one of the big movers in price as a result. This happens as investors in traditional markets like stocks or currencies flee to safe haven instruments, for which Gold acts one of the main markets of safety for investors.
Strong or weak US data will almost certainly impact the US indices market. There are several US index markets which could move with such data being released, from the NASDAQ to Dow Jones. One of the main markets to fall in this bracket is in fact the S&P500. Better than expected numbers could see the recent bear market in the US begin to ease up, as the health of the economy may be seen as being in better shape than anticipated. However if the number is worse, and even more people than forecasted have lost their jobs, we may see huge sell offs once more.