US NFP Forecast: Nonfarm Payrolls gains expected to accelerate slightly in November

• US Nonfarm Payrolls are likely to rise by 180K in November after October’s 150K increase.
• The US Dollar looks to the headline NFP and Average Hourly Earnings data for a fresh directional impetus.
• The United States employment data will be released by the Bureau of Labor Statistics at 13:30 GMT.

The high-impact Nonfarm Payrolls (NFP) data from the United States (US) will be published by the Bureau of Labor Statistics (BLS) on Friday at 13:30 GMT.

What to expect in the next Nonfarm Payrolls report?

The US labor market report is likely to show that the economy created 180K jobs last month, up from a job addition of 150K reported in October. The Unemployment Rate is set to remain unchanged at 3.9%.

A closely-watched measure of wage inflation, Average Hourly Earnings, is expected to inch higher by 4.0% in the year through November, a tad down from October’s 4.1% increase. On a monthly basis, Average Hourly Earnings are forecast to rise 0.3% in the reported month, compared to a 0.2% increase in October.

The US labor market data is crucial to the US Federal Reserve (Fed) interest rate outlook for 2024 and thus it has a significant impact on the US Dollar (USD) valuation.

Amidst cooling inflation in the US, markets price in that the Fed is done with its tightening cycle, expecting interest rate cuts as early as March. The probability for a March Fed rate cut currently stands at 60%, according to CME Group’s FedWatch Tool.

The Fed rate cut bets rose substantially after Fed Governor Christopher Waller, a known hawk, flagged a policy pivot, spelling doom for the US Dollar and for US Treasury bond yields.

“If the decline in inflation continues for several more months ... three months, four months, five months ... we could start lowering the policy rate just because inflation is lower," Waller said on November 28.

The October Core PCE Price Index data also bolstered dovish Fed expectations. The Fed’s preferred inflation gauge rose 3.5% on the year, moderating from a 3.7% reading while holding well above the Fed's 2.0% target.

In his recent public appearance, Fed Chair Jerome Powell tried hard to push back against expectations of interest rate cuts next year, but markets didn’t buy into his hawkish rhetoric. Powell said, “it would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance or to speculate on when policy might ease.” “We are prepared to tighten policy further if it becomes appropriate to do so,” he added.

On Wednesday, Automatic Data Processing (ADP) said the US private sector payrolls rose 103K in November, compared with October’s downward revision of 106K while missing the estimate of 130K. The Job Openings and Labor Turnover Summary (JOLTS) report showed that the number of job openings on the last business day of October slid to more than a 2-1/2-year low of  8.733 million. 

This week’s US employment data signaled loosening labor market conditions, which if backed by a weak November Nonfarm Payrolls data on Friday could bolster Fed rate cut bets.

Previewing the US labor market data, analysts at TD Securities noted: “Job gains were likely perky in November, with payrolls rebounding above the 200k mark after an October report that surprised expectations to the downside. Gains will partly reflect the ending of the UAW strikes, which had a material impact on manufacturing jobs in the last report. We also look for the UE rate to fall back by a tenth to 3.8%, and for wage growth to print 0.3% m/m.”

How will US November Nonfarm Payrolls affect EUR/USD?

The Nonfarm Payrolls, a significant indicator of the US labor market, will be published at 13:30 GMT. EUR/USD is meandering in the 1.07s in the run-up to the NFP showdown. The US employment data will determine the next directional bias for the main currency pair.

An encouraging NFP headline print and elevated wage inflation could prompt investors to reassess Fed rate cut bets, adding legs to the ongoing US Dollar recovery while dragging EUR/USD back toward 1.0700. Conversely, the US Dollar is expected to see a fresh downswing should the data disappoint and affirm dovish Fed prospects. In such a case, EUR/USD could stage a meaningful turnaround toward 1.1000.

Dhwani Mehta, Analyst at FXStreet, offers a brief technical outlook for trading EUR/USD on the NFP data release. “The main currency pair has broken through all major support levels as the previous week’s bearish momentum sustains ahead of Friday’s payrolls release. The 14-day Relative Strength Index (RSI) indicator is pointing lower below the midline, supporting the recent downtrend.”

Should the selling pressure intensify, EUR/USD could challenge the 50-day Simple Moving Average (SMA) support at 1.0700, below which a drop toward the 1.0650 psychological level cannot be ruled out. The next relevant cushion is seen at the November low of 1.0517. Conversely, Euro buyers need to recapture the 200-day SMA support-turned-resistance at 1.0825 to cement a sustained recovery toward the 1.0900 round level. However, the 21-day SMA at 1.0855 could be a tough nut to crack beforehand,” Dhwani adds.