Nonfarm Payroll Risk Tomorrow?

Nonfarm payrolls (NFP) report tomorrow morning. Two predictive reports came out today showing a weaker jobs market. ADP came out below expectations and jobless claims climbed now two weeks in a row. Other than inflation reports, nonfarm payrolls are probably the most important economic indicator for markets.

With stocks in a slight downtrend of late, hoping for trade war relief we'd be cautious going into tomorrow's report.

Jobless Claims Higher

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Source

Higher jobless claims typically means a slowdown of economic strength. Jobless claims are still near all-time record lows but markets care about the latest direction.

You see in the chart jobless claims picking up the last two weeks.

Those numbers will get reflected in tomorrow's nonfarm payroll report.

ADP was also lower than expectations today which over time parallels the NFP report.

Trade War Reaction?

Trade war news has picked up in the last two weeks. The slowdown in hirings could be related to business leaders taking a wait-and-see approach to trade war news.

Bloomberg reported that ISM's recent strength may have been because of a pull-forward of demand ahead of tariffs. Companies wanted to lock in lower prices before tariffs kick in and raise prices. If so that would imply strength now pulled forward demand from Q3. That would slow demand going forward and could be part of the slower jobs numbers as companies prepare.

The auto industry had positive news today that the US and EU were in talks to potentially cancel mutual tariffs.

Most importantly though is the US-China relationship which has apparently publicly soured. But the US-EU auto news brings hope that The US and China could also be pressing ahead behind the scenes.

Round Of Tariffs Hit Tomorrow

The first round of tariffs take affect tomorrow. China said if the US follows through with their tariff plans they will be answered in kind. The US in response has said that if China adds tariffs the US will follow. That sounds like a never-ending cycle if it happens.

Conclusion

We have a big news day tomorrow.