NFP History and Forecast: Levels, Ranges, Targets

The good news to June’s 222 NFP job growth is the 222 figure is fairly contained within short, medium and longer term averages. The bad news is all monthly averages from 1 to 78 years have been dropping since May and September 2015. Prescient is my October 2015 NFP post to state averages from 1 to 30 years reached significant peaks. Further is my May 2015 NFP post to state the 5 year average was negative 498.88.

The 1 year monthly average in May 2015 was 208.83, climbed to 243.25 in September 2015 then dropped to 186.50. The 5 year average in May 2015 was negative 498.88, jumped to 199.10 in September 2015 and now sits at 206.38. The 2 year average was 191.37 in May 2015, bolted to 233.87 in September 2015 then dropped to current 194.25. The 10 year average in May 2015 was 66.19 and now resides at 69.34. The 25 year average in September 2015 was 108.50 and is now located at 125.35.

NFP monthly forecasts and final results are volatile because monthly averages are volatile and this volatility from month to month began with the first February 1939 release. The key monthly question is where are NFP’s forecasted from, what averages then a statistical determination is rendered. The March 2015 result at 86,000 was forecasted from the negative 5 year average and explains the drop from 2015 February at 238,000. NFP is commonly forecasted at the 5 year monthly average and this explains as one of many examples, June’s 222 Vs the 5 year average at current 206.28.

Misaligned averages result in outlier surprises such as 86,000 March 2015 and the most recent 43,000 in May 2016. February, March and April 2015, final NFP’s were 238, 86 and 262. April, May and June 2016, final NFP’s were 153, 43 and 297. Outlier surprises are trading opportunities as the final numbers must realign to the fast changing averages.

Second NFP driver and now more than ever in the 78 year history of NFP’s is the time to focus on the 50,000 because 50,000 is the currency market price break point. The 50,000 is seen more times in the last 3, 10 and 20 year monthly averages than any other time in NFP’s history.

The 50,000 was seen 85 times in the last 20 years, 71 times in the prior 20 years, 68 times in the prior 20 years and 37 times from February 1939 to 1952. Overall, the 50,000 was seen 261 times in 942 months or 1/4 over the life of NFP. The 50,000 will experience many breaks in the months ahead as explosive job growth is in the forecast.

Was the 2008 and 2009 period the worst NFP’s seen since the Great Depression. No Democrats because the release began in February 1939 and long past the Great Recession.

NFP Data is released for the month prior. July’s release for example was for June. August release will reflect July.

220 months or 18.3 years from a total of 941 months or 78.4 years were negative. This means 721 months or 60 years were positive job growth numbers. 2008 to 2009 or 23 of 24 months were negative. The next negative period was the 2001 terrorist attacks on the World Trade Center. Then the 1980 – 1981 recession followed by the Kennedy Assassination in 1960 to 1961. Further negative years include 1974 to 1975 and 1956 to 1958. Next comes 1952 to 1954 and 1944 to 1949. This period 1944 to 1949 was WW 2 as well as Bretton Woods. Charted, 1944 to 1949 was the worst period in NFP’s 78 year history due to a speculation of a smaller population and overall smaller number of persons in the workforce. Read WW2 history to realize, the US was ill prepared to fight a war. The US didn’t even have guns to match the Germans. Democrats at it again.

NFP’s above the next break at 226 means 226 resides above every monthly average and every median from 1 to 10 years in successive order and every 5 years until the 78.4 year monthly average from February 1939. A total of 24 monthly averages and medians reside below last month’s 222 NFP. The supports are many and not only strong but every average from 1 year to 78.4 years are deeply oversold. As NFP’s managed to maintain a 150 to 300,000 range from 2015, the averages dropped and now offers massive supports.

Any downside risks are located at 210.83, 209.38, 206.28, 200.83, 194.25 and 186.50 at the 1 year monthly average.The 210.83 is the 4 year monthly average then 3 year at 209.38, 5 year at 206.28, 6 year at 200.83 and 194.25 at the 2 year average.
Targets range from 247 to 350,000 job growth gains over the next months. The averages completed their correction lower and are now prepared to take job gains far higher which means the averages are ready to rise and further act as supports.

What higher NFP means is DXY higher, far higher and EUR lower.

Brian Twomey

AUD/USD, Iron Ore, Wool: Levels, Ranges, Targets

Australia’s Neutral interest rate at 3.5 and current OCR at 1.5 is fairly well positioned not only in terms of Australia alone but 3.5 based on Debelle’s speech sits below Canada and the UK and above Europe and the US. Australia need to move current interest rates is zero although two factors down the road for consideration. If the Neutral Rate rises, Australia will be forced to raise. If the AUD/USD exchange rate rises to unacceptable RBA levels then a hard decision by the RBA would ensue to lower OCR.

The current drivers for AUD/USD as most vital to Australia’s economics and exports is Australian Iron Ore prices are set daily by the United States. Australia is the world’s largest exporter of Iron Ore. Secondly, Australian Wool is experiencing a tremendous resurgence in demand especially from China.

Australia is the world’s largest Wool producer and exporter and Wool was the second largest export for Australia in 2006 – 2007 followed by Beef. Peak Wool production and exports occurred from WW2 to absolute Peak in 1951. Wool is auctioned daily in Australia and the most vital indicator is the Eastern Market Indicator, the EMI.

Like NZD Milk and Auctions, the EMI is priced in AUD as well as USD. AUD Wool since Aug 2015 trades comfortably above USD based on today’s Wool prices. The Current Wool supply remains low while demand is extremely high and offers the Wool industry an extraordinary opportunity. The problem with Exports to China is the current 38% Tariff placed on Wool imports. Trade negotiations are underway to eliminate or lower the Tariff.

At current AUD/USD 0.7900’s Exporters as well as the Wool and Iron Ore industry gains profits but if AUD rises higher then those profits are cut. Debelle’s statement on a higher AUD as unacceptable for Australia was as much Export as well as inside Australia economics related.

AUD/USD. Remember last post and AUD/USD 0.7790. AUD climbed to 0.7963. AUD remains at current prices Richter Scale overbought. Longer term averages 50 to 253 Day are in the twilight zone.

AUD break points today are located at 0.7937 and 0.7906. The sell point is located at 0.7961. Overall targets lower are 0.7899 and 0.7882. Over the days ahead, targets begin at 0.7764 and travel lower to 0.7670’s.

 

Brian Twomey