Non-Farm Payrolls (NFP) is a significant economic indicator released by the US Department of Labor on a monthly basis. It refers to the total number of paid workers in the US, excluding farms, government, private households, and non-profit organizations. NFP is considered an essential metric to measure the overall health and performance of the US economy.

The leadup

The expectations in the leadup to the unemployment figures being released were that between 205k and 224k new non-farm jobs were to be created, unemployment remain at 3.4% and average hourly earnings remain at 0.3%.

During the course of the week Fed Chair Powel made statements during the Semi-Annual Monetary Policy Report with regards to where they see the economy recover and how to address the monetary policy as interest rates closed last year at 4.5%. Powel mentioned that more than likely he would like to see a weaker job market with the aim of getting inflation down to its target of 2-3%.

These statements put a lot of focus and uncertainty on the job data that was set to be released. 

The Data On NFP

The data was mixed as we saw Non-Farm Employment Change come out higher than expected with 311k new jobs created in comparison to the 224k, still significantly lower than last month’s 504k new jobs that were created. Unemployment increased to 3.6% from 3.4%, as well as average hourly earnings decreased to 0.2%. 

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How the markets moved

The resulting factor was dollar weakness coming into the markets as Gold closed up the day at 1868 from its daily low of 1827, and EURUSD rallied to make a daily high of 1.06998. The Nasdaq, Dow Jones and S&P all followed the decline as US Indices closed the day lower.

Market Reaction to the NFP Report 

The market's initial reaction to the NFP report was mixed. US stock futures initially went down following the release of the report. However, it became stable as investors considered the possibility of the Federal Reserve delaying the tapering of its bond-buying program.

The US dollar also fell against major currencies following the report, with investors expecting the Federal Reserve to take a more cautious approach to monetary policy.

Final thoughts on NFP Statement 

The NFP report is an important economic indicator that provides valuable insights into the US labour market's health and performance. The February report falling short of expectations could be attributed to several factors. This including the ongoing labour shortage and uncertainty surrounding the Omicron variant. 

However, the market's initial reaction was mixed, with investors weighing the possibility of the Federal Reserve delaying its tapering program. It's essential to keep an eye on future NFP reports to gain a better understanding of the US economy's performance.