Two Reasons Why Today's NFP Will Matter, Two More Why It Won't

At 8:30am this morning, the US Bureau of Labor Statistics is expected to tell us how many jobs were added last month, and what our new unemployment percentage is. Consensus anticipates the US economy will have added 162,000 jobs for the month of April. Market await with baited breath on the actual number, as it will be interpreted as confirmation or contradiction of economic recovery. This makes it the number one reason why today's non-farm payroll report is important for the average trader, especially those holding day- or other short term positions. Conventional thinking says to avoid trading ahead or imediately following wide economic reports, and today may well prove to be a day of volatility. Another reason today's numbers will matter is the sentiment beyond financial markets. The consumer sentiment may be widely affected by a headline number. A wide positive or negative variance on what has already been priced in by consensus will significantly impact how individuals will adjust their spending patterns in the following month. Which, ends up directly impacting corporate bottom-lines across businesses that are highly consumer-correlated. However, there are a couple of reasons today's number is just one more piece of fodder for the pundits. To begin with, the unemployment percentage is no longer an accurate measure of our added jobs. That number, currently at 8.2%, already incorporates gains economists did not expect until way later in 2012 or 2013. The reason it happened was due to a significant contraction in the labor force, which made job additions have a larger impact than normally warranted. With sentiment having improved earlier in the year, the labor force is expanding as well, as previous non-participants look to get in on the action. Another reason is the much discussed QE3, and the so-called “Bernanke-put.” A negative surprise will be a positive catalyst for those pining for continued pumping of liquidity into the markets, counteracting fallout from bearish reaction. Markets are currently pricing in that low rates will be sustained until 2014. The wide expectation is that markets will contract should such this “serum” be yanked out. So, believe it or not, a negative report will reassure continued liquidity. Stay tuned for reports on the markets action after the report is released!