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Expectations High for US Nonfarm Payrolls

H.S. Borji
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Expectations High for US Nonfarm Payrolls

The US economy created more than 190,000 jobs this month, according to preliminary market forecasts.

The monthly nonfarm payrolls report, courtesy of the Labor Department, is scheduled for release next Friday. Market participants will use the report to gauge the current pace of US recovery after inclement weather disrupted economic activity this past season.

US employers added 175,000 private payrolls last month, official estimates showed. The figure remained well below the 12-month average of 189,000. Joblessness unexpectedly rose 0.1 percentage point to 6.7 percent, as more workers entered the labour force.

The ADP Institute will provide its own estimate of nonfarm payrolls on Wednesday. ADP data have come under scrutiny in recent months, as they have diverged significantly from official government figures. ADP said the economy added 139,000 jobs in March.

At this month’s rate meeting the Federal Reserve dropped its 6.5 percent rate target and said it would consider a “wide range” of factors to determine optimal interest rate levels. While job creation would remain an important factor, the Fed said, economists have shifted their attention to the “dot plot,” which is a summary of policymakers’ interest rate forecasts. Fed officials believe interest rates could reach 2.25 percent by the end of 2016.

Nevertheless, for an economy still in recovery mode, job numbers provide one of the clearest and most widely understood guideposts for success. This means investors will react sharply to the payrolls data, regardless of rate hike expectations.

The US dollar, which was relatively steady against a basket of its major competitors this week, could have the most at stake. At the end of the Friday session, the US dollar index was at 80.18.

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