Forex Market: In Anticipation of Non-Farm Payrolls

Thursday, April 1, 2010

In the US the ADP Non-Farm Payroll has shown that companies there unexpectedly cut payrolls in March. The 23,000 decline was the smallest in two years and followed a revised 24,000 drop the prior month, data from ADP Employer Services showed today. Over the previous six months, ADP’s initial figures have overstated the Labor Department’s first estimate of private payroll losses by as little as 2,000 in February to as much as 151,000 in November.

A March payroll gain in line with the median estimate is due to the fact that the ADP’s figures aren’t influenced by weather and don’t include government payrolls which will reflect the hiring of temporary workers to conduct the census. The government has been hiring thousands of workers to conduct the regular 10-year U.S. Census, but those jobs are temporary. ADP includes only private employment and doesn’t take into account hiring by government agencies.
Analysts feel that companies are still hesitant to add workers until they are convinced that the economic recovery has taken hold. Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, which produces the figures with ADP said “the economic recovery has not been long enough or strong enough along the way yet to produce the kind of rapid employment that people are hoping for.”

Tomorrow's release of Non-Farm Payrolls is expected to show growth of 200,000 nonfarm jobs for March. Some economists are even predicting gains of up to 250,000. If the forecasts prove accurate, it would be the largest expansion since November 2007 and only the second advance in the past 27 months.

Although government statisticians try to account for season factors, severe snowstorms throughout the country skewed the data in February. In fields such as retail, construction and transportation, workers missed time and companies delayed hiring decisions. As a result, some of the increase in hiring that should have taken place in February got pushed into March.
Before Non-Farm Payroll data is released tomorrow American unemployment claims are due to be published later today. The figures have been improving in recent weeks dropping from 496K to 442K. Another drop in claims would raise expectations ahead of tomorrow's release however the figures are expected to remain almost unchanged.

Also due out later today is the manufacturing report issued by the Institute for Supply Management. The ISM report for March is projected to rise to 57.4% from 56.5%, according to a MarketWatch survey. Readings above 56% are viewed as consistent with strong growth in manufacturing.

In trading yesterday the US Dollar fell 0.62% against the Euro to close at EUR 1.3507. It gained 0.73% on the Pound to close at GBP 1.5182.

North of the border, Canada’s economy expanded at the fastest pace in three years in January, led by manufacturing, wholesaling and construction, adding to evidence that the country is recovering more quickly than policy makers expected.

Gross domestic product increased 0.6% from December, the fifth straight gain and the biggest since December 2006, according to data from Statistics Canada. The report suggests first-quarter economic growth is still coming in faster than the Bank of Canada predicted, after output expanded at the highest quarterly rate since 2000 in the October-December period. Investors have raised bets that Governor Mark Carney will increase his key interest rate in the next few months on signs of quicker inflation and growth.

Carney has pledged to keep his key lending rate at a record low 0.25% through June unless the inflation outlook shifts. He also said March 24 the commitment is “expressly conditional” on inflation, and said that a key measure of inflation has increased faster than expected.
The central bank predicted the economy will grow at a 3.5 % pace this quarter and a 4.3% rate in the April- June period before slowing through next year. Canada’s 5% growth in the fourth quarter exceeded the Bank of Canada’s 3.3 % estimate. Gross domestic product was 1.3% greater in January than in the same month a year ago. The country’s first recession since 1992 ended in the third quarter of last year.

In a separate report, Statistics Canada said that non-farm payrolls were unchanged at 14.53 million in January from December, and down 1.1% from the year-earlier month. Prime Minister Stephen Harper has said job creation is a top priority for his government this year.
In the forex online market the Loonie climbed up 0.39% against its American counterpart yesterday to close trading at CAD 1.0157.

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