Non Farm Payroll 2012 – Market Updates


Traders are currently bracing for the release of the Non-Farm Payroll report from the US. What exact figures are still unknown, predictions and indications are that the first NFP of 2012 is going to show growth in the US economy as a whole.

While this is great news for the US, it is bad news for other currencies such as the Euro and the Australian Dollar, both of which have been struggling against the USD since the 2011 holidays.

The first Non Farm Payrolls (NFP) report of 2012 is crawling into the limelight as investors will be closely watching to see if the recent improvement in US economic data is also reflected in the NFP figures. The latest data will be released today at 1:30pm GMT by the US Bureau of Labor Statistics. Why is the NFP report so significant at this time of the year? Because it reveals the number of paid jobs added or lost in the US economy, excluding the farming industry, reflecting the health of the US economic recovery.

US data improved, QE3 expectations start to fade

Since the $600 billion quantitative easing (QE) program ended in June, economic data has shown signs that the US economy is gradually improving. Data showed Weekly Jobless Claims fell for a third week. Figures also revealed an improvement in the housing market after Housing Starts and Existing Home Sales came in better than expected. The Housing market appears to be the US economy’s Achilles heel after the sharp downturn which triggered the financial crisis in 2007.

While 2012 is expected to be the most challenging year since 2009, the first Non Farm Payrolls report of the year may influence sentiment in the market. A significant improvement in US December payrolls data could erase expectations for a third round of quantitative easing. But the absence of what is known as QE3 may be a catalyst for a US dollar rally supported by a heightened risk aversion in the market.

Non Farm Payroll 2012
NFP Data - Economic Calendar

NFP 2012 data

Today’s Non Farm Payrolls report is expected to show an improvement in the labor sector for a second month with predictions of 150,000 new jobs added into the economy in December. The unemployment rate is expected to rise to 8.7% from 8.6%. With the eurozone debt crisis deteriorating, Greece and Italy having difficulties raising funds, while Italian government bond yields jumping to unsustainable levels, an increase in the number of jobs may reveal that the US economy remains on the path towards a strong recovery.

In the case of the NFP data revealing a close to or significantly above expectations figure, the dollar may find support as this will be an indication of growth and, subsequently, the need for further monetary easing will start to fade. If the NFP report reveals a significantly lower figure than anticipated, we may see the safe haven US dollar slide. In either scenario, a high level of volatility is expected, which may lead to large price movements.