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Nonfarm Payrolls Disappoints,While Private Employment Rose

By Glenford Robinson

U.S Trade Balance for November,

Improved Nicely,

Beating Market Expectation of -43.8 Billion

Nonfarm Payrolls unexpectedly disappoints, missing expectations of 164,000, with a less than expected reading of 145,000 and a previous reading of 256,000. The Nonfarm Payrolls Report measures changes in the total number of people employed during the previous month, excluding the farming industry. A higher than expected reading should be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD. The Bureau of Labor Statistics released the Nonfarm Payroll Report on Friday, January 10, 2020 at 8:30 AM, New York Time. So, what does this mean? May I ask?

The Unemployment Rate came in steady, matching forecast of 3.5% and a previous reading of 3.5%. So, with a reduction in Nonfarm jobs and unchanged Unemployment data, it seems as if employment increased in another sector of the economy, but where? Let’s try to find out.

Through further investigative fundamental analysis, we notice that the Automatic data Processing (ADP) Nonfarm Employment Change Report for December, increased, coming in much higher than market expectation of 160,000 jobs, by posting a reading of 202,000 jobs, beating previous readings of 124,000 jobs.  

The ADP National Employment Report measures monthly changes in Non-Farm Private Employment. The measure is based on the payroll data of approximately 400,000 U.S. business clients. The ADP released the Nonfarm Employment Report two days before the government’s data. The ADP report often predicts the government’s Nonfarm Payroll Report. However, the change in ADP Report can be very volatile.

Our investigation has therefore revealed the reason why the government’s Nonfarm Payroll Report came in less than expected, while the Unemployment Report came in unchanged, and that reason is because private employment increased. But, Why? Let’s find out.

A higher than expected ADP Nonfarm Employment Change reading should be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD.

Automatic Data Processing released the ADP Nonfarm Employment Change Report on Wednesday, January 8, 2020 at 8:15 AM, New York Time.

The U.S. Trade Balance for November improved nicely, beating market expectation of -43.80 Billion with a reading of -43.10 Billion, edging out a previous reading of -46.90 Billion. The Trade Balance Report measures differences between imported and exported goods and services over the reported period. A positive movement along the number line indicates that more goods and services were exported than imported; the U.S. therefore, sold more goods and services to other countries, causing money to flow from other countries’ bank accounts back into to U.S. bank accounts. In other words, Imports of goods and services into a country, counts as a negative toward the country’s trade balance (a country’s balance sheet), while exports of goods and services counts as a positive toward the county’s trade balance or country’s balance sheet.

A higher than expected reading of the Trade Balance Report should therefore be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD. As a result of this, Forex traders, who trades using fundamental analysis, will open up bullish positions on the USD. In Layman’s terms, these traders will start buying the USD because they anticipate the value of the USD to rise as a result of the positive trade balance. 

The Imports number came in better than previous reading, posting a 2 billion decrease in Imports, with current reading of 252 Billion and previous reading of 254 Billion. The Imports Report measures the total number of goods and services brought into the country through legitimate means for use in trade. Foreign producers Import goods and services to U.S. consumers. A higher than expected reading should be perceived as negative for the U.S. economy and bearish for the USD, while a lower than expected reading should be perceived as positive for the U.S. economy and bullish for the USD.

Traders don’t immediately respond to these economic data all the time. Sometimes it takes anywhere from a week to several weeks for the market to respond to these changes. So, one would anticipate that the EUR/USD currency pair will start going down within a week of the trade balance release date. The Bureau of Economic Analysis released the Trade Balance Report on Tuesday, January 7, 2020 at 8:30 AM, New York Time.  This is one of the many reasons why Fundamental Analysis should be added to any successful trading plan. This is also the reason why I write these economic review articles and host these economic review videos.

This approach helps successful traders find hidden gems in the market. Trading Foreign Currency as a successful trader is more than just looking at technical indicators. It is looking at the market from a fundamental, technical, and sentimental perspective.  Successful Forex traders approach their markets as investors, first. This is why they are successful. They don’t approach the Forex market because they are desperate for money; they approach the market to execute a successful trade because they know the money will come after their trades becomes profitable. Successful traders also don’t have very high and outrageous expectations of making a million dollars from one trade. Successful traders also know who the nefarious players are.

If you are participating in a game, you better know who your opponents are and how they play the game.  Forex trading is no different. Forex trading is similar to participating in a competitive game. So, if you don’t know the rules of the game, you can’t expect to win any matches in the game. So, to become a winning participant in the game of Forex trading, you must know the rules of the game. And how will you learn the rules of this trading game? You will learn the rule of this game by sheer practice and intense study. In fact, you got to know what to study or else you will just lose all your time and your money. You will need a trusted mentor to help you along the way. After following these steps, you will see how easy trading Forex becomes, but even when trading Forex becomes easy for you, never under estimate it. If you do, it will teach you a painful lesson that you will never forget.

In the Forex market, as a trader, you will have more than one opponent. You should know who they are!

Some information I purposely left out because they are secrets. If you would like to learn these secrets, you should just log on to Mstardom Finance at Mstardom.com and send us a request via our contact form, with your full name, email address, and phone number, and we will be gladly assist you with the information, simply because you have shown the desire to become successful in Forex trading. 

Let’s now talk about the Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers’ Index (PMI) Report on Business for December. The ISM Non-Manufacturing PMI for December also known as the ISM Services PMI beats market expectations of 54.5 and a previous reading of 53.9 by posting a welcomed 55 percent. A reading above 50 percent indicates that the services sector has expanded, while a reading below 50 percent indicates that the services sector has contracted. As we can see, the ISM Services PMI came in above 50%, which tells us that the sector has expanded.

The ISM Services PMI Report on Business compiled monthly survey responses from company purchasing managers to gauge the activity levels of Non-Manufacturing companies within the economy. Purchasing managers’ opinions counts because these managers will be the first to know how well their companies did in the reporting period. This is why traders take the Report very seriously.

A higher than expected reading should be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD.

The better than expected ISM Services PMI and the Balance of Trade improvements tells us that the services sector could be the contributing factor for the improved trade balance. In fact, we know the improvement in Exports could never be attributed to the manufacturing sector because the manufacturing sector has been underperforming lately.

The actual U.S. Exports readings reported on January 7, 2020 at 8:30 AM, New York Time came in at 209 Billion, beating out the previous reading of 207 Billion. The U.S. Exports data provides the total U.S. dollar amount of goods and services exported out of the country. A higher than expected reading should be perceived as positive for the U.S. economy and bullish for the USD, while a lower than expected reading should be perceived as negative for the U.S. economy and bearish for the USD.

Let’s see how the U.S. Exports number relates to the services sector and private employment. Remember that we mentioned that private employment increased, illustrated by the increase in ADP Non-Farm Employment? Well, according to the U.S. Commercial Service, “A Basis Guide to Exporting,” the United States leads the world in producing and exporting services. And to top it off, the Services sector, including all private-sector economic activity other than agriculture, mining, construction, and manufacturing, happens to be the largest component of the U.S. economy. In fact, the service sector accounts for 90 Million jobs; that is nearly 80% of the private sector gross domestic product (GDP). With these confirmations, we can feel confident that the increase that we saw in the services sector was due in part to the increase in U.S. Exports because the services sector plays such a large role in overall economic activity and GDP.

Nonfarm Payrolls Disappoints, While Private Employment Rose

Disclosure

The Mstardom Finance trading team currently trades the EUR/USD currency pair, utilizing long, short, and hedging strategies. 

Disclaimer

Information in this video, and in our articles published on Mstardom.com, may contain forward-looking statements, which could involve high risks and uncertainties. Markets and instruments profiled in our videos and in our published articles, are for informational purposes only and should never be taken as professional investment advice or recommendations to buy or sell in these assets. You should do your own in-depth research before making any investment decisions. Mstardom Finance does not guarantee that the information presented in our videos and articles is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is timely in nature. Investing in Open Markets involves a high degree of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.

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