It’s hard to think the US is heading into a recession when the jobs market is so strong. That’s been the Federal Reserve’s problem, so it has constantly stressed the labour market as being a major indicator for the pace and path of its interest rate hiking cycle. If you take a look at the charts below you can see that the US has been steadily adding jobs to its economy over the last year. However, is that about to change?

What’s expected for US jobs on Friday?

The expectation for US jobs on Friday is for the economy to add 170,000 jobs down from the prior reading of 187,000 jobs. Average hourly earnings are expected to stay the same at 4.4% and so too are the average weekly hours worked. It’s important to remember that the market will interpret job data through an inflationary lens.

The way to understand it is like this: if jobs are stronger than the market is expecting, that is seen as inflationary and should lift interest rate expectations. This in turn should lift yields, lift the USDJPY, lift the USD, and send the EURUSD lower alongside precious metals, like gold and silver.

On the other hand, if the jobs data comes in lower than the market is expecting, this should send yields lower, the USD lower, the USDJPY lower, and gold and silver higher.

What’s the trigger for a trade?

The best opportunity on Friday will come from any indication that the US economy is starting to struggle and jobs are starting to decline. So, if the headline comes in under 40,000, the average hourly earnings are below 4.3%, and the average weekly hours are below 34.2, then markets should expect that print to reassure the Federal Reserve that the US economy is finally showing signs of slowing down. This in turn will allow the Fed to be less aggressive on the path of interest rates, and it should send the USD lower, USDJPY lower, and gold and silver higher However, the market reaction can always put in a surprise, so remember that nothing is ever guaranteed when it comes to the financial markets.