May non-farm payroll preview

Today NFP report is to be published at 12:30 GMT from US.

What is NFP report?

• NFP or non-farm payroll report is the monthly statistics on labor condition in the US released by US department of labor statistics. The report comprises goods, construction and manufacturing sector companies.
• This report influences the financial markets deeply across asset class.

Key highlights –

• Headline number for total hires last month was 160,000. May ADP employment number was better than April, at 173,000.

• Change in private payroll has been 171,000 last month. Today expected 150,000.

• Total payrolls are expected at 160,000, same as last month.

• Most vital component is wage growth, which only recently has started showing strength. Today it is expected to rise by 0.2% on monthly basis and 2.5% annually.

• Labor force participation rate still weak at 62.8%.

• Unemployment rate is expected to drop to 4.9%.

• Underemployment rate is expected to fall further from current 9.7%

Impact –

• Volatility is sure to be on the card, post release.
   
• Any number above 200,000 would be considered as very good and Dollar will start gaining its lost grounds.

• While number below 150,000 even below expectations will pose some doubts over June rate hike and it will make April drop more sustaining.

Better than expected wage growth would be key for Dollar’s strength. Any wage growth above 2.5% will bring the focus on faster rate hikes. Better payroll can also boost sentiment for equities.

We, over the period, expect weakness in Dollar as current hike path isn’t sustainable to Dollar’s strength.

Dollar index is currently trading at 95.62, up 0.06% so far today.