The Non Farm Payroll report detailing the number of jobs added to the US economy in March is released this Friday, 8.30 am (EDT). The FED is projecting an optimistic 680K new jobs, while the market consensus is that the payroll will report in at 655K. For context, the payroll value for the preceding month came in at 379K. Since February, the US economy has opened up a lot, explaining the considerable jump in the payroll value.
The US Non Farm Payroll is an important event on the economic calendar, and market makers around the world will be watching the announcement with a sharp eye.
This is an important question. The market doesn’t appreciate unpredictability, and a hint of weakness in the US economy could lead to some sharp corrections.
The Russell 2000 index has been on a tear for the past year, and a correction could be imminent. A poor March payroll value could be the catalyst for the correction event. Small to medium enterprises make up a decent portion of the US economy (over 50% last time I checked). The Russell 2000 is an index comprised of small to medium enterprises. Thus, the health of this sector is under intense scrutiny when payroll numbers are released. With such phenomenal success in the past year (up ~98%), the index is begging for something to slow it down.
Perhaps the US economy is not as resilient as the market thinks. Or maybe, and here I would like to posit a question: Might the stimulus checks dissuade the unemployed to seek work? It is not a crazy assumption, a little “right-wing” for my taste, but entirely unfathomable. It could be argued that a portion of those unemployed in the previous month have less incentive to find work when the government is providing Covid relief checks.
Mix in the possibility of the White House sending out another round of stimulus checks, and the impetus to find work is further diminished.
Busy week ahead as September kicks in. As New Zealand and the United States elections slowly approach, the Coronavirus pandemic will most likely be the center focus for many parties and how they handle the post Coronavirus world. Here is your week ahead.
Like most of Europe, Germany is experiencing an uptick in cases as a reopening of Europe too early takes its toll. However, this has not stopped protesters storming the German Government building in Berlin alongside Germany's total cases ticked over 243,000. With prices of oil slowly increasing, analysts expect inflation to increase slightly by 0.1%. Furthermore, with Germany's unemployment benefit allowing unemployed citizens to claim up to 67% of their previous wage, analysts predict no change in the unemployment rate at 6.4% in the week ahead.
Australia continues to fight a hard battle with the Coronavirus, after their original strategy of having no lockdown has lead to massive spikes in Melbourne, Victoria. Australia recorded 123 new cases of the Coronavirus – all in the state of Victoria. Denita Wawn, Master Builders Australia's Chief Executive, stated that "Our industry is facing a blood bath… Private sector investment is evaporating, and the government must step in to save businesses and jobs," conveying how dire the situation is in Australia. However, the Reverse Bank of Australia is expected to hold interest rates at 0.25%. Any deviation from this consensus is most likely to move the Australian dollar significantly. Furthermore, Melbourne's sustained lockdown has seen forecasts of GDP growth to drop to -5.3%, down 6.7% GDP growth of 1.4% in the previous quarter.
One of the country's worst-hit with the Coronavirus, Italy, has recorded over 268,000 cases with cases continue to spike, with newly registered cases yesterday just over 1,200. Italy is predicted to be one of the first to get a grant from the Bloc's 750 Billion Euro grant as it suffers from worsening GDP growth pre-Coronavirus. Italy is set to release Manufacturing PMI's to 52, slightly higher from 51.9 last month.
Europe is currently experiencing a resurgence in Coronavirus cases as an early lifting of lockdowns just before Summer has forced a spike across Europe. However, many countries are against a second lockdown due to the Economic calamity it will bring. Analysts predict a drop in the inflation growth rate to 0.9%, down from 1.2% in July.
The United States continues to post daily double-digit Coronavirus cases as their total case count tops 6 Million. As elections approach in just over a month, President Donald Trump continues to let the economy open to win over voters. Non-farm payrolls are predicted to be just over 1.4 million, down from a previous 1.73 million print.
As usual, we have many critical economic events that traders need to watch out for to avoid being whipsawed by the market in the week ahead.
Trade Cautiously.
