The US jobs report for January is set to be released on Friday morning, just two days after the Federal Open Market Committee (FOMC) announced its decision to keep interest rates unchanged on Wednesday, as widely expected. In issuing its statement, the Fed once again noted that the labor market has continued to strengthen. Indeed, although the past several months of jobs reports have mostly fallen below consensus expectations, the data has still shown solid growth in US employment. January’s non-farm payrolls (NFP) could potentially show even better results, if other recently-released employment markers are to serve as any indication.
Because the closest FOMC meeting has just passed, the impact of Friday’s jobs report on financial markets is not likely to be as substantial as it would be if the Fed had an immediately upcoming rate decision. The next FOMC meeting is scheduled for mid-March. With that said, however, any substantial deviation from expectations in the jobs report could certainly help either boost or impede the Fed’s potential rate hike schedule this year. The more likely scenario on this particular Friday is that the jobs data exceeds forecasts, in which case the US dollar may finally receive some much-needed support after having fallen sharply since the beginning of the year. A better-than-expected NFP showing should likewise weigh on recently-rallying gold prices.
Markets are currently weighing the paths and interplay of both fiscal policy under the new Trump Administration along with monetary policy under the Fed. As usual, Friday’s jobs report will play a role in helping to determine the latter. In turn, the Fed’s future pace of monetary tightening and Trump’s economic policies going forward will continue to make a major impact across a broad array of financial markets.
President Trump has repeatedly stressed his strong focus on job retention and creation in the US. This promise follows on the heels of solid monthly employment increases throughout most of 2016, which highlight a healthy US employment landscape that helps support a more robust pace of interest rate increases by the Fed this year.
Last month’s data showing 156,000 jobs added for December fell short of expectations. As noted, however, while the past several months of non-farm payrolls data have also mostly disappointed forecasts, they have still shown a solid and stable US employment picture overall. After the Fed not only raised interest rates in December but also indicated that officials now expect three further rate hikes in 2017 instead of two, focus has turned to the pace of Fed tightening this year. Certainly, better-than-expected jobs data could help accelerate the process while worse data could very well impede it.