Market Report Before Non-Farm Employment Report

Market Report Before Non-Farm Employment Report

The latest nonfarm payrolls report (NFP) will be released today before the critical meeting of the US Federal Reserve (FED) dated December 13-14. Market expectations are for NFP to rise by 200,000 in November. NFP had recorded an increase of 261,000 in the previous month.

The last NFP report of 2022, which will be published by the Bureau of Labor Statistics (BLS), affiliated to the US Department of Labor, is of critical importance before the December meeting of the FED. While consumer inflation in the world's largest economy recedes from its peak, NFP will be decisive in terms of the direction of expectations in markets where it is spoken that the FED will be less aggressive in tightening monetary policy.

At this point, it should be noted that the NFP report consists of three important issues. Two of these are the unemployment rate and average hourly earnings. The unemployment rate is expected to remain stable at 3.7 percent in the markets, while average weekly earnings are expected to increase by 0.3 percent in this period.

In the report to be published, the moderate weekly average earnings increase of 0.3 percent, together with an NFP in line with the market expectations, may support the expectation that the FED will reduce the pace of tightening the monetary policy at its December meeting and increase interest rates by 50 basis points instead of 75. The bearable unemployment rate, which will not stray far from 3.7 percent, may also be supportive.

On the other hand, if the NFP falls short of 200 expectations and the unemployment rate rises slightly more than 3.7 percent, this could mean that labor market conditions are starting to loosen, making the expectation that the FED won't hesitate to cut the rate of interest rate hikes into the key pricing story for the next two weeks. Under this outlook, the investor risk sentiment in the markets is likely to continue to improve and the weak dollar is likely to support equities and major currencies.

On the other hand, an increase in average weekly earnings of more than 0.3 percent along with a stronger NFP could reverse the fundamental pricing behavior, meaning that wage pressure is still intense in the inflation outlook.