The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for March on Friday at 12:30 GMT.
Investors will scrutinize the underlying details of the employment report to assess whether the Federal Reserve (Fed) is likely to consider an interest-rate hike later in the year. Still, the immediate market reaction could remain subdued, with trading volumes staying thin on the Good Friday holiday.
What to expect from the next Nonfarm Payrolls report?
Investors expect NFP to rise by 60K following the disappointing 92K decrease recorded in February. The Unemployment Rate is expected to remain unchanged at 4.4%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, is projected to decrease to 3.7% from 3.8% in the previous month.
Previewing the employment report, TD Securities analysts note that they expect a moderate 30K increase in NFP in March.
“The reversal of weather and strike effects should result in a payrolls composition similar to the end of 2025, with outsized healthcare support. We also look for the Unemployment Rate to remain at 4.4%, with a risk of moving higher. Average Hourly Earnings likely increased a subdued 0.2% m/m, translating to 3.6% y/y,” they add.
Automatic Data Processing (ADP) reported earlier in the week that employment in the private sector rose by 62K in March. This print followed the 66K (revised from 63K) increase reported in February. Assessing the report’s findings, “overall hiring is steady, but job growth continues to favor certain industries, including health care,” said Dr. Nela Richardson, chief economist at ADP. Meanwhile, the Employment Index of the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) survey came in at 48.7 in March, pointing to an ongoing contraction in the manufacturing sector payrolls.
Danske Bank Research Team also projects the NFP to come in at 30K and see the Unemployment Rate rising to 4.5%. “Recent indicators, including declines in daily job postings and weekly private sector employment growth, point to a softer labour market,” they note.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months’ reviews and the Unemployment Rate are as relevant as the headline figure. The market’s reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
How will the US March Nonfarm Payrolls affect EUR/USD?
The USD outperformed its rivals in March as it benefited from the risk-averse market atmosphere and growing expectations for a hawkish tilt in the Federal Reserve’s (Fed) policy outlook, with surging crude Oil prices reviving fears over inflation getting out of control. The US Dollar Index (DXY) gained more than 2% in March and experienced heightened volatility in the first days of April.
While speaking at an event organized by Harvard University earlier this week, Fed Chair Jerome Powell noted that there is tension between the Fed’s two mandates, keeping maximum employment and stable prices, and said that they are in a good place to wait and see how the current situation plays out. Commenting on labor market conditions, Powell said that job creation is very low and that it’s challenging to enter the job market.
Meanwhile, NY Fed President John Williams acknowledged that the job market is sending signals, adding that the low hiring rate might be feeding into economic pessimism.
According to the CME FedWatch Tool, markets are currently pricing in about an 80% probability that the Fed policy rate will remain unchanged at the range of 3.5%-3.75% by the end of 2026. In early March, markets were projecting a 92% chance that the Fed would cut the policy rate at least once this year.
A positive surprise in the NFP, with a reading of at least 70K, could cause markets to reassess the possibility of a Fed rate hike and boost the USD. Conversely, a print below 50K, especially if combined with an uptick in the Unemployment Rate, could make it difficult for the USD to outperform its rivals and help EUR/USD hold its ground. Nonetheless, unless a de-escalation of the Middle East conflict leads to a steady decline in Oil prices, a steady uptrend in EUR/USD could be difficult to come by, even if the NFP misses analysts’ estimates.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“EUR/USD’s near-term technical outlook suggests that the bearish bias remains intact despite the latest recovery attempt. The pair remains below a descending trend line drawn from late-January and the Relative Strength Index (RSI) indicator on the daily chart retreats toward 40 after failing to clear the 50 midline earlier in the week.”
“On the downside, 1.1430-1.1400 (lower limit of the Bollinger Band, static level) aligns as a key support before 1.1300 (round level) and 1.1220 (static level). Looking north, immediate resistance could be spotted at 1.1600 (round level, descending trend line) ahead of the 1.1680-1.1700 region, where the 100-day Simple Moving Average (SMA) and the 200-day SMA align.”
(This story was updated on April 3 at 07:10 GMT to reflect a consensus change in the annual Average Hourly Earnings to 3.7%)
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
