NFP Preview: Is the US Job Market Finally Weakening?

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Months of restrictive monetary policy have had little effect on the labour market but recent jobs data suggests we may be approaching a steady decline

This Week’s Jobs Data Leans Towards a Softer PrintThe main event for the week is upon us as non-farm payroll is expected to bounce back slightly from last month’s disappointing print. In April, US jobs came in way below what was expected – providing the first real sign of weakness in the labour market despite months of restrictivefiltering through the economy. The April data was the first real shock to the labour market as all prior data beat market estimates this year.

Job openings were trimmed back, nearer to the 8 million mark – suggesting businesses have tapered their demand for labour – while job quits rose slightly. Job quits usually provide a gauge of nervousness within the labour market as workers tend to quit when they feel their prospects of finding suitable employment elsewhere are manageable and tend to stay in their current position when companies institute hiring freezes.

Ahead of NFP, this week’s low comes into focus at 104 flat. The US dollar index carries a high weighting inmeaning the hawkish cut yesterday has weighed on the greenback with the move maintaining the potential of an extended move lower is the NFP figure misses the mark or the unemployment rate rises to 4% or above. 103 naturally becomes the next level of support but the decline may not be a fast one since inflationary pressures have dented the Fed’s confidence that we are on the path to 2%.

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