NFP preview: 185k expected as cooling employment persists

Employment figures decelerated dramatically in April

In a noticeable slowdown, April’s nonfarm payrolls dropped to 175k while the unemployment rate increased to 3.9%, marking the first signs of US labor market cooling in 2024. This shift came unexpectedly as all previous payroll figures this year had surpassed forecasts, illustrating a turning point in employment trends.

185k added jobs expected in May

Analysts expect a slight recovery in May with an anticipated 185,000 jobs added, signaling a potential stabilization—crucial for Federal Reserve considerations. Forecasts for Nonfarm payrolls have been notoriously unhelpful so far this year, with January’s number overshooting expectations by 173,000, for example.

Unemployment rate to remain at 3.9%

The unemployment rate is projected to hold steady at 3.9%, a level deemed sustainable by the Federal Reserve. Unlike NFPs, this metric has proved stable in recent months, hovering around 3.8% since August of last year. This consistency suggests a more positive balancing act in the labor market, maintaining a rate that supports economic health without overheating.

Job openings and ADP employment signal soft data to come

Economic indicators early this week pointed to softer employment conditions, with JOLTs job openings and ADP employment change both reporting lower than expected figures on Tuesday and Wednesday morning, respectively. These indicators have led to revised expectations, possibly foreshadowing softer overall employment growth in the upcoming official reports.

What could the May jobs report mean for US dollar?

The upcoming May jobs report is pivotal, potentially influencing the Federal Reserve’s rate decisions for the remainder of the year. A weaker-than-expected jobs number could expedite rate cuts, negatively impacting the US dollar, while a strong report could delay cuts, bolstering the currency—all else equal. Traders will likely be monitoring EUR/USD for movement in the dollar surrounding this event, due to its liquidity and the added volatility around tomorrow’s European Central Bank (ECB) meeting.