US Nonfarm Payrolls likely to depict waning labor market strength in November

• Nonfarm Payrolls are expected to rise by 50K in November after the September increase of 119K.
• The United States Bureau of Labor Statistics will publish the delayed jobs data on Tuesday at 13:30 GMT.
• The US Dollar is set to experience intense volatility on the employment data amid growing labor market concerns.

The United States (US) Bureau of Labor Statistics (BLS) will release the delayed Nonfarm Payrolls (NFP) data for October and November on Tuesday at 13:30 GMT. 

Volatility around the US Dollar (USD) will likely ramp up on the employment reports for fresh insights on the US Federal Reserve’s (Fed) path forward on interest rates going into the turn of the year.

What to expect from the next Nonfarm Payrolls report?

Tuesday’s US employment report will be unusual, covering data for both October and November. October's data won’t be complete as the BLS will only release indicators from the establishment survey due to collection issues caused by the government shutdown.
Economists expect Nonfarm Payrolls to rise by 50,000 in November. Markets also eagerly await the October figure after the 119,000-job gain seen in September.

The Unemployment Rate (UE) is likely to remain unchanged at 4.4% during the same period.

Meanwhile, Average Hourly Earnings (AHE), a closely watched measure of wage inflation, for October and November will also be published alongside the NFP releases. The AHE rose 3.8% year-over-year (YoY) in September.

Previewing the employment report, TD Securities analysts said: “We expect the November employment report to show a 70k rebound in job gains after contracting by 60k in October. Weakness in both months will likely be led by the government sector.”

“We also look for the UE rate to edge higher to 4.5% in November as the labor market gradually softens. Average Hourly Earnings likely rebounded to 0.3% month-over-month (MoM) after a subdued 0.1% in October,” they added.

How will the US September Nonfarm Payrolls affect EUR/USD?

The US Dollar is hanging close to two-month troughs against its major currency rivals in the aftermath of a less hawkish Fed outcome and ahead of the highly anticipated NFP publication.

The broad USD weakness has sent the EUR/USD pair back above the 1.1700 mark. Will the major see additional upside?

The Fed announced the expected 25 basis point (bps) interest rate cut to 3.5%-3.75% last Wednesday in a 9-3 vote.

Fed Chairman Jerome Powell stuck to his cautious tone at his post-monetary policy meeting press conference, disappointing those who had been positioned for a more hawkish one.

Powell noted: “First of all, gradual cooling in the labor market has continued,” adding that “unemployment is now up three-tenths from June through September.”

Markets continued to price in two more rate cuts next year, against the US central bank’s median expectation for a single quarter-percentage-point cut next year, smashing the Greenback across the board.

On the economic data front, the Labor Department reported last week that Initial Claims for state unemployment benefits jumped by 44,000, the biggest increase since mid-July of 2021, to a seasonally adjusted 236,000 for the week ended December 6.

Meanwhile, the Institute for Supply Management (ISM) Services PMI showed little improvement in November at 52.6 compared with 52.4 in October, while the Automatic Data Processing (ADP) reported that US private payrolls unexpectedly declined by 32K in November, following a revised 47K increase. Analysts estimated a job gain of 5K.

The employment placement firm Challenger, Gray & Christmas said earlier this month that “recent signs from unofficial data point to heavier job reductions to come, with announced layoffs through November topping 1.1 million.”

With growing labor market concerns, expressed by Powell as well, the NFP data will be closely scrutinized to help determine the number of Fed rate cuts expected in 2026.

A weaker-than-expected headline NFP release and an unexpected increase in the Unemployment Rate in November could aggravate concerns over the slowdown in the US jobs market, bolstering bets for another rate cut by the Fed at its next meeting in January. In such a case, the USD could see a fresh leg down, driving EUR/USD closer toward 1.1800.

Conversely, if the NFP beats estimates and the Unemployment Rate stays at 4.4% or even falls, EUR/USD could come under strong bearish pressure toward 1.1600. A positive surprise in the jobs data would push back against expectations of more than one Fed rate cut next year, providing the much-needed cushioning to the Greenback.

Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD: 

“The main currency pair consolidates near the two-month high of 1.1769, while holding well beyond all the major daily Simple Moving Averages (SMA). Meanwhile, the 14-day Relative Strength Index (RSI) flirts with the overbought territory on the daily chart, suggesting that there is more scope for upside. Further, the crossover of the 21-day and 50-day SMAs adds credence to the bullish potential in the pair.”

“If the upside regains traction, the next resistance is seen at the 1.1800 round level, above which the 1.1850 psychological barrier will be tested. The September 17 high of 1.1919 will be next on buyers’ radars. On the flip side, any corrective pullback could see initial support at the 100-day SMA of 1.1644. The next demand area is seen at around 1.1610, where the 21-day and 50-day SMAs hang around. Deeper declines could challenge the 1.1550 level.”

(This story was updated on December 16 at 10:11 GMT to reflect a last-minute consensus change in Nonfarm Payrolls for November to 50K.)