Market Alert: What to expect from the NFP?

The US job market remains in the spotlight as the economy recovers from the pandemic slump and the NFP report could be absolutely crucial for the markets. Read this analysis to learn why.

Election Time!

Yes, that’s it – this is the final straight of the presidential campaign and Donald Trump needs a strong number to bolster his case of brisk recovery. Trump is seen in polls as more qualified to run the economy but is trailing Biden overall so he needs to show that he was able to restore solid economic conditions quickly. Nothing is more important for the voters than jobs and this is the last report before the Election Night. A good reading would therefore be welcome for markets for 2 reasons – it would confirm that the economy really improves and it would boost chances of Trump who is investors’ favorite in the Elections.

Employment growth to slow

After collapse in April, employment has been recovering at the pace exceeding one million per month. The market consensus doesn’t see it continued at least officially (expected number is +850k). This is partly because consensus workers are no longer being hired in significant numbers but also because the reservoir of ready-to-return workers from temporary layoffs is more and more depleted and the number of permanently unemployed increases as companies cut their costs. However, after upbeat ADP number (150k above the consensus) and against generally upbeat flow of US data, actual expectations might be higher and in our view a reading below 1 million would be seen as a bit of disappointment.

Market to watch : US500

We already mentioned why this reading is so important for the equities and the broad US500 is the market to be watched here. After the September correction the index managed to recoup some of the losses and looks to return to the upwards trend. A strong NFP would greatly help.