Attention shifts to NFP

US futures are slightly higher ahead of the open on Friday, as traders turn their attention away from Capitol Hill and to the December jobs report.

It’s been some week, and 2021 has well and truly picked up where 2020 left off. Thankfully – and I wouldn’t bet against being proven wrong – at least on the US political level, I think the worst of the drama may be behind us. This week was a massive step too far and the video put out by the President suggests he knows it too and may now opt to de-escalate.

Joe Biden will become President on 20 January and the topic of conversation can turn back to getting this horrific wave of Covid-19 under control and the economic recovery.  The stimulus that was passed at the end of last year avoided a cliff-edge but doesn’t come close to the Democrats’ ambitions and they now have the numbers, just, to do something about it.

The jobs report today will offer some interesting insight into the state of the economy as more restrictions are forced upon it. The country may not be in full lockdown yet but the numbers are shocking and the new strains are compounding the problem. The country may not opt for a lockdown but clearly more severe measures are coming if there is any hope of getting it under control in any reasonable time.

Initial expectations had been for just shy of 100,000 jobs created last month but the ADP number earlier this week may have forced a rethink. To be clear, I do not look to the ADP for a reliable sense of what to expect from the NFP, but it was a massive miss to the downside, showing 123,000 job losses. It’s difficult to ignore and actual expectations may now differ from official forecasts.

The unemployment rate is also expected to tick higher to 6.8% but it’s probably not worth reading too much into this at the moment. Participation will also be important but, ultimately, the numbers in the coming months will likely be far worse and give a much better insight into the level of support needed and the size of the task at hand.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a Market Analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam