The Paradox of US NFP: Modest Growth Signals Economic Threat and Potential Interest Rate Hikes

FXMAG.COM: Could you please comment on the US NFP?

On Friday, the US will publish the employment data for May 2023. The average forecast suggests NFP growth by 180 thousand after rising to 253 thousand earlier.

This is not a confident expectation. After a winter during which the US employment market added over 200 thousand new jobs per month, these statistics look modest. However, in this case, high digits might imply a threat to the US economy. If the Federal Reserve System sees that companies continue to compete for high-skilled workers, it might continue with its tough monetary policy.

Strong employment market data will encourage further interest rate hikes to prevent inflation from rising.

The situation turns out paradoxical. Good employment reports are no longer seen positively because they could be the basis for a further rise in crediting costs.

Data that differs from forecasts will cause increased volatility in the US stock market.