NFP Report – How Economy affects Nations
In the past, I have written extensively about economic data and why it matters for traders. Economic data which is released by various agencies around the world gives the investors an indication of what is happening in the world. It shows them whether the economies are growing or contracting so that they can make sound judgements. For instance, if the economy of an emerging country is growing, the data will tell the investors to put their money there. If on the other hand the data is weak, then contrarian investors might invest there. Others will exit. I have also written about the key economic data that an individual should look at. These include: jobs numbers, inflation numbers, industrial, and service sector growth. Last week, the Bureau of Labor Statistics released the Non-Farm Payrolls (NFP), wages, and the unemployment rate. This is a report released on a monthly basis with the intention of telling Americans whether the economy is growing or slowing down.
NFP Report – Headline Numbers
The first thing we saw last week was on the strong headline numbers. While analysts had forecasted a 205K growth in numbers, the numbers that were released were 215K. This means that the economy brought 215K jobs in the American economy which while being smaller than the previous figure, beat the analyst estimates. This showed that the economy is currently doing well as far as job creation is concerned. In addition, the numbers helped reduce the unemployment rate to 4.8% which is it 8-year low.
NFP Report – Corporate Profits
In January, I forecasted that earnings will have an important bearing this year. The other themes I forecasted were: crude, China, and commodity prices. The March Non-Farm Payrolls had a key outcome towards corporate profits. In the report, the average hourly earnings increased to 0.3% versus the 0.2% which was forecasted. This shows that companies are now paying employees higher wages which is another indication of a strengthening economy. This could therefore be an indicator that another rate hike will come in the second quarter if the momentum is sustained through April and May.
NFP Report – Sustained growth in the services sector
From the report, most of the jobs were contributed by companies in the service sector. The exact number was 245K which was a significant the 199K in the non-service jobs. The figure below shows the breakdown in the service sector.
From FX Street:
As seen in the chart above, the education and the health services sectors was the biggest contributor to the job market. The retail sector followed closely.
NFP Report – Manufacturing sector losing momentum
The services sector contributed significantly to the job market. However, the manufacturing sector (both durable and nondurable goods) lagged behind as seen in the charts below.
As seen above, most of the sectors in both durable and non-durable goods lost jobs with machinery manufacturers shedding more jobs. The only sub-sectors that added jobs were electrical, equipment and appliances manufacturers, non-metallic mineral products, chemicals, and petroleum and coal products. The other sub-sectors in this category lost money. Remember, this was not the first month that this sector shed jobs as it did the same in February.
NFP Report – Improved participation rate
The report also indicated that the there was improved labour participation rate which went up to 63.0% versus the analysts’ consensus of 62.9%. On the other hand, the jobless rate went up to 5.0% from the previously announced 4.9%. Investors and traders should therefore look at these numbers and make decisions.