It’s NFP not NFT

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Source, Author, 2022

It’s NFP not NFT

The Non Farm Payroll (NFP) report is released by the US Department of Labor on the first Friday of every month. Even in the best of times this number is carefully watched by market participants, who are trying to understand the state of the US Economy.

TIMES ARE DIFFERENT

But these are not the best of times.

Inflation is running hot, the job market is running hot and unemployment is running low. The chart below shows the Year on Year percentage (YoY) changes in NFP over the past 5Y.

Non Farms Payrolls, 5Y, source St. Louis Fed, Author, 2022

This divides naturally into three regions. Before pandemic we saw NFP increased at an average of 1.4% YoY. During pandemic NFP cratered, falling at a rate of -7.4% YoY. And the source of The Fed’s concern: post pandemic NFP is growing at a rate of +5.3% YoY. Jobs are being created at an unprecedented rate. What’s wrong with this, you ask? To answer that you need to understand The Fed.

WHAT IS THE FED UP TO?

The Fed’s stated goal is to increase unemployment to counter what they perceive as an overheated job market. We previously discussed The Fed’s stance here

OFTEN THEY OVER REACH

Historically when The Fed has targeted inflation they’ve tipped the economy into recession. Will it be different this time?

Today’s release at 1330 EST will impact the market as we will increasingly clarify what The Fed’s next action will be at their upcoming FOMC meeting on September 21st.

THINKING OF TRADING THIS NUMBER?

Finally, roughly two and a half hours before the release of NFP we see futures in New York are trading slightly up. Having spent the bulk of my career on trading desks at some of the best investment banks on the planet, I can tell you often they know before you know.

So don’t try to “trade” this number. After all, everyone knows Retail Can’t Trade.

UPDATE 1330

US NFP number came in very hot at 528K jobs created, consensus was for 250K. Unemployment falls to 3.5%. Average hourly earnings up 0.5%, more than consensus.

Stocks dropping hard in pre-market.

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