Non-farm payrolls report from March 2023- market weekly recap, April 3-6

Non-farm payrolls report is the monthly employment indicator as the Bureau of Labor Statistics keeps track of job conditions in the macroeconomy excluding farmers, private households, and nonprofit workers. It is a significant economic indicator in times of inflation as U.S. Federal Reserve mentioned their goal to fight price surges with higher unemployment. In other words, employment represents the overall economic condition; The economy is optimistic when the unemployment rate is low, and consumers are likely to have more money to spend and keep the inflation going. In other words, the market is expecting to see a decline in hiring and monthly job creation.

https://www.financialjuice.com/News/7010399/US-Nonfarm-Payrolls--Unemployment-Rate-Prep.aspx

March's non-farm report was released on Friday, April 7. The estimation for the monthly employment increase was 238,000, and the published data was 236,000. However, the unemployment rate was lower than expected at 3.5% compared to the 3.6% estimate. Overall, the data showed jobs market is cooling down, along with the news of tech companies' layoff waves. This should meet FED's expectation since the monthly job creation was in the decline trend all of 2023, which dropped from 472,000 new hires in January to 326,000 in February, and now 236,000 in March.

https://www.stlouisfed.org/open-vault/2019/july/nonfarm-payrolls-why-farmers-not-included

Articles

Hasenstab, B. 2019. Nonfarm payrolls: Why farmers aren’t included in jobs data. Federal Reserve Bank of ST. Louis. https://www.stlouisfed.org/open-vault/2019/july/nonfarm-payrolls-why-farmers-not-included

Cox, J. 2023. Job growth totals 236,000 in March, near expectations as hiring pace slows. CNBC Economy. https://www.cnbc.com/2023/04/07/jobs-report-march-2023.html#:~:text=Nonfarm%20payrolls%20grew%20by%20236%2C000,upwardly%20revised%20326%2C000%20in%20February.&text=Average%20hourly%20earnings%20rose%200.3,lowest%20level%20since%20June%202021.

Liang's comment

As Non-farm payroll is correlated with inflation, the release of reports would usually cause market movements. The stock market wasn't open on April, 7 as it is Good Friday, however, the futures market and U.S. dollar index (DXY) were still intact when the data was published. Indices Futures didn't really change while the DXY surged to a 3-day high.

The indices futures are positively related to the stock market as US 500 is equivalent to tracking S&P 500 companies and US 100 keeps track of the top companies in NASDAQ. On the other hand, while DXY doesn't directly affect the stock market, however a sign of strength in the dollar indices usually would mean a drop in the stock market. One thing to notice is that the correlation between DXY and the Stock market usually won't immediately react, and won't always react. However, as indices futures didn't move upward immediately and DXY was showing strength despite the non-farm data being as expected, we could conclude the market wasn't too optimistic with the result. The cooling in employment does happen, but the new job creation could easily grow again in the future. If that does happen, it would mean FED needed to hike the rate higher again to fight inflation and bad news to the stock market.

The reports and signs are also important to the short-term market. Continuing from last week, March 27-31th, the stock market was still within the current price range, which means the market didn't go up or down significantly from April 1st to 6th. Since there was a big rally in the last couple of weeks and pushed the stock market back to the 2022 August high point, we are in a crucial price range. The market showed strength as the minor correction didn't happen. We could say the market is waiting on the economic indicator to make a move. Since nonfarm payroll was released on the day market closed, while the indices futures and indices dollars markets didn't show a significant change on Sunday, Apr 9, we could expect the eyes to be on the next big announcement- CPI that would release on April 12, 2023.

https://www.tradingview.com/chart/lINnSfWv/?symbol=NASDAQ%3AQQQ (lines drawn by me)

QQQ is the ETF tracking of the NASDAQ index, which we could see weekly opened and closed at pretty much the same price. While the market is in an uptrend.