Record NFP, Unemployment Numbers Expected

Posted Thursday, May 7, 2020 by
Shain Vernier • 2 min read

Friday is a big news day on Wall Street, headlined by the release of April’s jobs report. Nonfarm Payrolls and Unemployment are going to come in at historically dreadful levels, worse than those of the Great Depression. Consensus estimates have U.S. Unemployment hitting somewhere between 14.0% and 19.0%. The figures are going to be bad and everyone knows it.

U.S. Unemployment To Hit Record Levels

So, what will April’s titanic job losses mean to the markets? In my opinion, not much. Here’s why:

  • The sticker shock of jobless claims numbering in the millions is long gone. This has been a weekly trend since late-March. Friday’s jobs report for April is merely a summation of initial COVID-19 fallout.
  • There are real questions surrounding the validity of the unemployment statistics. One school of thought suggests that robust aid packages have removed the incentive to seek employment. In many cases, federal compensation to displaced workers exceeds their normal salary. Until such benefits expire, a portion of the unemployed will actually lose money going back to work. This phenomenon may contribute to heightened jobless rates until late-July.
  • Many job losses are temporary in nature. As the U.S. economy reopens over the next several weeks, hundreds of thousands of people will return to work.

In the markets, anything can happen. We may end up seeing huge participation upon the release of Friday’s NFP and Unemployment reports. However, it isn’t wise to bet big on prices driving one way or the other substantially. These figures are already baked into the cake ― basically, they tell us what we already know.

The big question is this: how fast will economic growth return to pre-COVID-19 levels? Unfortunately, only time will give us that answer.

WTI Crude Oil Futures Enter Rollover

This morning has brought an early rollover to WTI crude oil futures. July is now the dominant contract, with a traded volume edge slightly greater than 50/50 over June. Below is a last look at the daily chart for June WTI crude oil futures.

June WTI Crude Oil Futures (CL), Daily Chart

Overview: It appears as though WTI is returning to normal. Gone are the days of super contango and negative pricing. Now, July WTI crude oil prices have a good shot of reflecting the normal bullish seasonality of late spring.

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