Fundamental analysis: The report on employment and its impact on the dynamics of the national currency. 2/2

Continuing the theme of the impact of the labor market on the dynamics of the national currency, special attention should be paid to the very report on employment and its analysis. What will be discussed in this article.

How to analyze the report on employment

The employment report is not just an indicator of unemployment, but a whole complex of important values ​​that further affects both the unemployment rate and other economic indicators of the country.

For greater clarity, consider the US employment report (NonFarmPayrolls, NFP). This report is very informative, since every first Friday of the month is published and with an extensive amount of data, which greatly simplifies the analysis. This report, like the rest of the reports, should be perceived by the trader in the complex and only then it can be judged rationally.

• Do not fixate on the unemployment rate. The unemployment rate is a very important indicator, but it is built on other report data and often gives only a superficial view of employment (like the average temperature).

Fig. 1 .: US unemployment rate chart

 

• Keep track of the number of jobs created (Change in the number of employees in the private non-agricultural sector of the US). This indicator largely influences GDP and speaks about the rate of its growth.

Fig. 2. .: Chart of the number of new jobs outside the US agricultural sector

 

• Salary growth (Average hourly wage in the US). Influences inflation and indicates the quality of new jobs. So, if the growth of wages is reduced with the growth in the number of new jobs, this indicates a low quality of jobs, which can eventually cause a number of problems, such as an increase in the number of unemployment benefits, a reduction in inflation, or a collapse in the rate of growth of jobs in the future.

Fig. 3. Average hourly wage in the USA

 

• Analyze the revised values ​​and the overall dynamics of the indicator. Often it happens that the actual data is weak, below the forecast, but the revised values ​​for the previous month are much higher. As a result, the report can support the national currency. Do not be lazy to look at the graph of the dynamics of this or that indicator, it will allow to determine the general trend and discard statistical errors.

As practice shows, the employment report can be very ambiguous and at first glance may be misinterpreted, especially when the unemployment rate is used for the key indicator of the report. Therefore, this report, like most others, should be considered in a complex, which will allow to see the current picture more holistic.

In the next article, we will consider the impact on inflation of inflation indicators.

Anton Hanzenko

Many other topics can be found on the site in the Trader’s Blog!

And if you have an offer – what to write about in the next article – write to us at info@esterholdings.com!