Ahead of today’s US Jobs Report, it is important to take a moment and understand what figures really matter. The majority of traders focus on the number of new jobs and the unemployment rate, while nowadays, the Federal Reserve looks at wages inflation. Without wages inflation, the Fed will likely be very reluctant to raise rates anytime soon. Before going in to more details, lets review the estimates.

 

US Jobs Report Estimates

 

Economists are estimating an increase of 203K new jobs in April following 215K new jobs in March of this year. The Unemployment Rate is expected to remain stable at 5%, but many will be watching the participation rate today, which may rise further on the recent boost in consumer confidence.  Consequently, many believe that this may also result in a higher unemployment rate today.

 

Wages Growth To Over Shadow The Rest Of The Figures

 

The most important figures to watch today are the wages growth data, which are expected to have a notable impact on the markets and likely overshadow any positive or negative reading of the NFP and the unemployment rate.

 

For example, a disappointing NFP and Unemployment with higher wages, could keep the US Dollar higher as a June rate hike would be back on the table.

 

On the other hand, a higher NFP with better unemployment and lower wages, could renew the downside pressure on the US Dollar in the coming hours, as a June rate hike would consequently be off the table.

 

ADP Non-Farm, Non-Farm Payrolls & Unit Labor Cost Index

 

For the time being and after the notable decline in ADP Non-Farm Employment change, many expect a softer NFP today. However, the Unit Labor Cost Index, which soared by the most since Q4 of 2014, might be an indication of higher wages and inflation to come in the coming months. Therefore, higher wages today would not be a surprise to many analysts.

 

Employment Components

 

A look at the employment components in many sectors shows some slowing which might be an indication of a softer NFP today, including ISM Milwaukee, ADP Non-Farm, Consumer Confidence, Philly Fed Manufacturing, NY PMI, Chicago PMI, KC Fed, Dallas Fed, Challenger Jobs Cur, ISM Manufacturing and Richmond Fed Manufacturing. The positive figures were the jobless claims, 3 week MA of claims, continuing claims, ISM Non-Manufacturing and the Empire State Manufacturing Index.

 

Philly Fed Employment & NFP Correlation

 

In the past months, Philly Fed Manufacturing Employment Component had a notable positive correlation with the NFP at around 0.20 so far. In the past few years, each time the Philly Fed Employment Components declined sharply, the NFP showed notable weakness. Last month, Philly Fed Employment Component posted the biggest monthly decline since July 2009, which may also be another indication of a softer NFP today. But as we noted before, most analysts will be keeping an eye on wages growth today.

 

USD Outlook

 

From a technical analysis point of view, the US Dollar Index does not appear that bullish. The index retraced by 61.8% from the latest decline as shown on the chart, while the technical indicators appear to remain positive. The 61.8% will be watched very carefully, which stands at 93.94, and could very well be the new top before the downside pressure resumes.