After years of resilience, the latest economic data suggest a turning point in the U.S. labor market. For May, economists are projecting a 60,000 payrolls. This comes after a downwardly revised increase of 64,000 payrolls reported last month. We know that the economy is always changing. Policymakers and market participants pay a lot of attention to shifts in payrolls because they strongly correlate to how well the economy is functioning.
Today, the U.S. labor market looks extremely resilient at first glance — though early signs of cooling have started to appear. Early macroeconomic indicators tell us that despite still-positive job growth, subtle changes beneath the surface deserve our concern. Understanding this quickly evolving landscape will have significant implications for future economic development policies and investments.
Employment Change Report Highlights
The ADP Employment Change report gives us tons of great information about the state of private sector employment. In December, it welcomed an upward revision of 41,000 additional jobs. This optimistic figure follows a decrease of 29,000 private payrolls in the previous month. The change signals a return to form in private sector hiring, but a measured one.
While this is welcome news, analysts point out that the new growth in private payrolls still leaves a net loss when looking back at the drop from earlier. The increases and downs show the still-recovering dynamic in the worker market and that it is important to peel back the layers of these numbers.
Along with payroll changes, job openings in every sector have seen a particularly steep decrease. In November, job openings fell to 7.146 million, down from 7.449 million. This decline was less than what was predicted, with projections expecting a little over 7.6 million openings. This continued decline indicates a continuing tightening labor market, which could be changing how quickly and broadly industries are hiring and making decisions about retaining employees.
Jobless Claims and Economic Indicators
The latest data on initial and continuing jobless claims adds more context to the picture of an extremely tight labor market. This brought the four-week moving average of Initial Jobless Claims down to 211,750, a decrease from 219,000. This decline means fewer people are applying for unemployment benefits, a sign that continued job security for most Americans remains intact.
Continuing jobless claims increased, climbing to 1.914 million from 1.858 million. This recent increase elicits concerns about the long-term employment security of specific sectors of the labor force. Economists will be looking at these trends with great interest as they assess the strength of a still-robust labor market.
America’s monthly jobs report is a big deal. For forex traders, it’s a key economic indicator that determines how they play the game. This new report will drop on the first Friday following the reported month. It continues to provide indispensable clues about who’s getting jobs, where they’re going, and what the economic recovery looks like.
Impact on the US Dollar Index
While these employment numbers play out, the US Dollar Index (DXY) is at about 98.88. The trade-weighted dollar index is a measure of the dollar’s strength against a basket of other currencies. Common economic indicators, such as payroll growth and initial jobless claims, have a powerful effect on this strength.
The relationship between employment indicators and currency value is an important consideration for traders and policymakers to understand. A robust labor market supports faith in the dollar. Even when signs of cooling come, they can introduce danger by creating uncertainty in financial markets.