Getting Ready for a Big Day; 2023's First Non-farm Payroll in Focus

By: Miguel A. Rodriguez

11:13, 06 January 2023

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The spotlight is still on the US labor market figures today. Analysts anticipate 200k non-farm payrolls and 3.7% unemployment in today's release of unemployment and non-farm payrolls. 

Wall Street's major indices fell on Thursday after data showed a tight labor market and comments from Federal Reserve officials pointed to higher interest rates for a longer period of time. ADP's national employment report showed a higher-than-expected rise in private employment in December, while another report showed weekly jobless claims fell last week. These figures followed the number of job openings in the United States, which was also higher than market analysts' expectations. 


Treasury yields, or market interest rates, rose slightly in response to these reports. Markets are concerned about a strong labor market because it gives the Federal Reserve an excuse to keep tightening financial conditions for longer than expected this year.  


Today, the most important labor market figures, the unemployment rate, and non-farm payrolls will be released. If this data also shows a tight labor market, such as a stable or falling unemployment rate and/or a high number of non-farm payrolls, markets may react negatively by discounting more aggressive interest rate increases. However, there is no strong correlation between previous data and what is published today, so there is still the possibility of stronger or weaker data. Analysts anticipate a 3.7% unemployment rate and 200k non-farm payrolls. 


On the other hand, comments from Fed official Bullard, one of the more "hawkish" voting members, were less aggressive than usual at the end of the day, pointing out that inflation is slowing and betting on a soft landing for the economy. These remarks boosted market confidence, but the level of uncertainty remains very high. 


In recent days, the North American indices all fell more than 1%, with technology stocks bearing the brunt of the damage. The US dollar strengthened again yesterday as interest rates rose in anticipation of today's non-farm payroll figure, which will determine the currency's course in the coming days. 


In the commodities market, it is worth noting the performance of Natural Gas, which has continued to fall due to global weather conditions with temperatures significantly higher than average for this winter season, resulting in a drop in gas consumption. Technically, it has reached a price concentration area of around $3.70, which should serve as price support. 


Today, investors will continue to focus on US non-farm payrolls to determine market price action. 

Sources: Bloomberg, Reuters 

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