Why Non-Farm Payrolls Could Beat Expectations

Non-farm payrolls are due for release on Friday and there is a very strong chance that job losses were less than 600k. I am going to be doing a thorough preview of NFPs later this week, but here is one of the PRIMARY reasons why payrolls could beat expectations. The employment component of service sector ISM has a very strong correlation (see chart) with non-farm payrolls. I show this chart every month and it has been reliable leading indicator for NFPs. The employment component rose from 32.3 to 37.0. The last time we had a similar rise was in Feb, when non-farm payrolls printed 90k less than the previous month. The market current expects job losses of -610k.

Graph: Bloomberg

About Kathy Lien 235 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

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