Employment Forecast for United States Remains Strong

Alan Penny

6 February 2020

3 min read

dollar notes under US flag

  • Unemployment Claims come out better than expected
  • Lowest unemployment level in US since 1969
  • Non-Farm Payroll due on Friday

The Employment picture for the United States continues to look very strong, as the Unemployment Claims figures came out on Thursday at 202,000, much lower than the 215,000 expected for the week. This shows that fewer unemployed people in the United States than anticipated, as this is a weekly gauge of those looking for unemployment benefits.

the lowest unemployment rate since 1969

The United States is currently blessed with the lowest unemployment rate since 1969, something that would have seemed impossible just a few years ago. As a result, the US dollar continues to attract some flow longer term.

What the announcements indicate

The Unemployment Claims is an aggregate figure of those looking for insurance benefits on a weekly basis in the United States. It is used as a gauge of whether or not there are significant firings. As this indicator gets larger, it shows that there could be potential deterioration in the labor market. By extension, this has a massive effect on the US economy, as consumption is 70% of GDP.

The Non-Farm Payroll figures come out tomorrow, and they are widely followed by the trading community. This figure released on Thursday will be used cumulatively to suggest what the following month’s release will look like in the Non-Farm Payroll figures.

It should be noted that the Non-Farm Employment Change for the month of January is expected to show an addition of 161,000 jobs for the United States, while Average Hourly Earnings month-over-month is expected to gain 0.3% for the same month. Furthermore, the Unemployment Rate is expected to come out at 3.5%, unchanged from the previous announcement.

US economy very resilient

The main takeaway from these numbers is that the United States economy should remain very resilient, and therefore the US dollar should continue to strengthen. The US dollar has been very strong against the euro and the Australian dollar lately. It has even strengthened against the Japanese yen, as money is clearly flowing into the United States via the stock market.

The announcement on Friday will naturally have a significant effect on volatility and pricing of the US dollar. So, at 8:30am New York time, expect a lot of noisy trading.

However, if the numbers come out as expected, it’s likely that the US dollar will continue to strengthen over the longer term. That’s because GDP in several of the world’s economies remains well beneath the US growth rate.

The US growth rate has the S&P 500, NASDAQ 100, and Dow Jones Industrial Average all attracting monetary flow. The Treasury markets in the United States have also been attracting monetary flow, as the interest rates being paid are much higher than most of the other larger markets.

Many of these markets are offering negative yields, something that is designed to keep money from flowing into the bond market and into the stock market of those countries. Going forward, it looks as if we should see more of the same, with the United States leading the way for the rest of the world.

Written By
Alan Penny

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