Next Friday, the Non-Farm Payrolls (NFP) report is set to reveal growing momentum for the world’s largest economy. The increased vaccination pace coupled with fiscal and monetary support led the U.S. economy out of the recession faster than initially thought. 

However, while the labor market makes incremental gains, it still remains below the pre-pandemic trend. In earnest, it is too early to compare to pre-pandemic levels, but early indications point to a stronger report on Friday.

America Expected to Add Over 600K New Jobs

The United States economy is expected to add 633k new jobs and to continue the positive trend seen lately. As always, the NFP report is accompanied by other relevant pieces of economic data that may shift the dollar on their own.

Last month, the employment-population ratio reached 57.6%, slightly higher than the previous month, but on a rising trend. Also, the average weekly hours in the price industry remained positive, pointing to a recovering sector.

The biggest focus of this Friday’s report is on the unemployment rate. It is forecasted to decline further, to 6%, after last month it settled at 6.2%.

However, before getting too excited about it, investors should interpret the release in relation to the realistic unemployment rate. Such a rate refers to the adjusted unemployment rate for the circumstances generated by the pandemic – it stands about 2% higher than the official unemployment rate.

This gap needs to be filled quickly, and the risk at this week’s report is that the U.S. economy added even more jobs than the forecast. While 633k is a huge number, the chances are that the actual will beat the forecast due to the increased vaccination pace and an accommodative Fed.

For the dollar, the week ahead is crucial. The greenback trades with a mixed tone, gaining against the euro but remaining weak against Bitcoin, for example. Also, the stock market remains close to all-time highs, despite the dollar gaining some momentum recently.

All in all, expect investors to remain calm closer to the NFP, and for the volatility to increase dramatically on Friday. Because it is a bank holiday, traders should prepare for wider than normal spreads. Also, a new trading month begins this week, so the positioning before and after the NFP will influence the market flows.