A non-farm payroll report has a unique ability to capture the attention of the financial markets.
However, for traders who are currently fixated on the banking industry, the upcoming April edition of the report may not be particularly relevant. This is because the concerns and anxieties in March regarding the banking sector are once again becoming a focal point.
Nonfarm payroll is a term used by the U.S. Bureau of Labor Statistics (BLS) to refer to the total number of paid employees working in the non-farm sector of the economy. It is a widely used economic indicator that measures the monthly change in employment in the United States, excluding farm workers, government employees, and non-profit organization employees.
The nonfarm payroll report is released by the BLS on the first Friday of every month, and it provides information on the total number of new jobs added or lost in the previous month, as well as the unemployment rate, average hourly earnings, and average weekly hours worked. The report is closely watched by economists, policymakers, and investors as an important indicator of the health of the U.S. labour market and the overall economy.
Economists predict that US employers will continue to increase their payrolls, which has been a consistent trend since the beginning of 2021. However, they anticipate that the rate of growth will be significantly slower than in March. If the actual number of jobs added is in line with the forecast of 185,000 and the jobless rate remains around the estimated 3.6%, the Federal Reserve (Fed) would interpret this as a positive sign that the labour market remains strong despite challenges in certain sectors.
It is unlikely that a number close to the consensus will prompt the Fed to tighten its monetary policy again in June, as they have already raised rates by 500 basis points in this cycle.
In other words, even if the non-farm payrolls report is exceptionally good, it is unlikely to cause significant movement in Treasury bonds.
(It’s worth noting that the short-term end of the bond yield curve is trading at a high price, even taking into account the possibility of the Fed lowering rates later in the year. Therefore, there may be some correction in the two-year maturity at some point.)
At present, the financial markets are primarily influenced by developments in the troubled banking sector. Investors are particularly concerned about the performance of PacWest, First Horizon, and Western Alliance.
During a post-meeting statement earlier this week, Chair Jerome Powell remarked that the resolution and sale of First Republic marked the end of a period of severe stress. However, the current pricing of interest rates indicates that traders remain unconvinced that the period of stress has truly ended.
At this point in time, the unease among lenders is much more significant to traders than yet another report confirming the ongoing strength of the labour market.