US April Nonfarm Payrolls in Focus as Markets Eye Fed Rate Opinion

The United States Bureau of Labor Statistics is set to release the April Nonfarm Payrolls (NFP) report on Friday at 12:30 GMT with markets closely watching the data for fresh clues on the Federal Reserve next policy move.

Economists expect the US economy to add around 62,000 jobs in April next the much stronger than expected increase of 178,000 jobs recorded in March. The Unemployment Rate is forecast to stay steady at 4.3%, while annual wage growth, measured by Average Hourly Earnings is expected to rise to 3.8% from the early 3.5%.

Analysts at TD Securities believe the final employment report could show signs that the labor market is becoming more stable after several months of mixed data. They assess payroll growth of around 80,000 jobs supported mainly by hiring in healthcare and leisure & hospitality sectors while government employment may refuse slightly. They also expect wage growth to remain temperate on a monthly basis.

Earlier this week data from Automatic Data Processing (ADP) showed that private sector employment increased by 109,000 jobs in April improving from March revised gain of 61,000. ADP Chief Economist Dr. Nela Richardson noted that hiring remains healthy among both small and large businesses although mid-sized employers are display weaker demand. Meanwhile the employment component of the Institute for Supply Management (ISM) Services PMI improved to 48 in April from 45.2 in March indicating that job losses in the services sector are slowing down.

The US Dollar (USD) has remained under pressure against major currencies despite the Federal Reserve delivering a relatively hawkish tone during its April policy meeting. Improved global risk emotion due to easing geopolitical tensions in the Middle East and possible currency market intervention by Japan have contributed to the USD recent weakness.

Federal Reserve Chair Jerome Powell acknowledged after the meeting that labor demand has softened but intensified that the central bank remains flexible due to ongoing inflation concerns. He stated that policy decisions are not predetermined and that the Fed is prepared to adjust policy in either instruction if needed.

According to the CME Fed Watch Tool markets currently expect a high probability that the Fed will keep interest rates unchanged within the 3.5%–3.75% range through the end of 2026. However traders are still pricing in smaller chances of either a rate hike or a rate cut later in the year.