NFP preview: 185k expected as cooling employment persists

Key points

• The May Employment Situation Report will release on Friday, June 7th at 8:30am EST
• Expectations for the May jobs report include 185k jobs added and an unemployment rate of 3.9%
• Employment slowed drastically in April, in the first sign of cooling in 2024
• Chances of a Fed rate cut in the fall will likely increase if employment expectations are met
• A surprise reading could have immediate and lasting implications for the US dollar

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.

How to trade US dollar

1. Open an account to get started, or practice on a demo account
2. Choose your forex trading platform
3. Open, monitor, and close positions on USD pairs

Trading forex requires an account with a forex provider like tastyfx. Many traders also watch major forex pairs like EUR/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.

You can help develop your forex trading strategies using resources like tastyfx’s YouTube channel. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.

Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.