What To Expect From US Non-Farm Payrolls

All right, very good morning. It is Friday, 3rd of April. I hope everyone is well. I'm just going to kick off firstly by saying please like and subscribe to the channel on YouTube if you don't already do so. It will be very much appreciated by everyone here, me included. It does feel always a little bit odd just doing this at home. I think through my career I've gone from being sat on a trading floor delivering this to hundreds of people, to then working as the head of a desk at a bigger company, then broadcasting this to tens of thousands of people, to now I'm kind of sat here at home on my own. And just so people are clear here, because I have had a few questions, I do have trousers on. I'm not— it's not just a shirt and then my pajamas underneath. So just to make that clear. But a couple things then here I just wanted to show you. This is the Amplify Trading website. Um, if you just search amplifiedtrading.com. One thing I just wanted to quickly show you was basically when you're on the home page, if you scroll down, whether you're a trader or a student, you can basically click the Learn More because we have two quite distinct different arms of our business. I'm more involved in the trader side. If you click on that Learn More on the trader side, we've just updated our webpage, so I'd really appreciate you guys checking it out. Maybe give me some feedback, just drop a comment on the video. I'd really like to get your, your thoughts. So obviously a bit of a video here of what would be our normal operations from our trading floor in the City of London, a couple of kind of the things that explain what we do essentially, the morning briefing, the members of the team. So these two guys, Will and Piers, are the co-founders of Amplify, and they're going to be joining me for a live Zoom private webinar. If you did want to take part in that, if you've not already registered, then I'm going to drop the, the link at the bottom in the description of this video. So make sure you register for that. I'm going to start half an hour before payrolls comes out. We'll listen in, watch it live, analyze it, and then do a bit of a debrief and, and take some questions. So absolutely welcome to join us. And then there's 3 different programs that we have in this, this newly designed website. It makes it way more clear in my opinion. So do have a look There's the Amplify Now portal, which is something we just released brand new for 2020. And that's— I think it's about 72 on-demand videos delivered by specifically really the head of trading, Piers, and myself. But what we've been doing, we've added a new section where I do little macro snippets where I talk about— say, I did the live coverage of the jobless numbers yesterday, talk about tracking coronavirus. But Sam North, one of our traders and one of the senior mentors, he also does a daily strategy across different, uh, products and asset classes. So it's definitely worth checking out. Anyway, let's— I'm going to leave that up for you to have a look at in your own time, but let's just get back to markets and what we're looking at. And let's, let's kick things off with just generally the, the state of play at the moment. Obviously, non-farm payrolls coming up, one of the main features of today, but we'll get under the bonnet of that in a moment. And what we're expecting. The main thing here is, you know, equities after such a powerful week that we saw last week, obviously we got up to that, that high that we printed, what, on Tuesday, and we've been pulling back ever since really. I mean, you can see here on this chart and the top left where we hit that last week high on the test that another kind of double double top test, and then we came all the way coming back down here. We have recovered a little bit. We failed really to break the, the actual opening weekly low. So if we're looking at actually the range of this week, I mean, this is the upper bound here and the lower bound, and that has been respected in terms of— we had a false kind of break, managed to close just above it on that candlestick on the print on the 30-minute on the 1st, so midweek And then same case again yesterday. Remember, we had a run lower. We had the jobless claims, of course, and that kind of sets us up for the payroll number we're going to be looking at shortly. But that was quickly reversed. Remember what we saw? A massive jump in crude oil at the time. And that came— I mean, when you actually look at this chart, you probably think, well, it doesn't look that big, actually. But I mean, just to put things into context, that candlestick there, that spike That's 25%. 25% move in crude oil is massive. I don't think I've ever seen anything like it in terms of that, that severe a move over that short time frame. I mean, even when you think about those, um, the Iranian drone attacks on the Saudi Aramco infrastructure at the back of September of last year, when we're talking more like 15%, and these were massive moves then. Now talking about 25%. Interestingly though, We have pared the majority of that move, and actually I've not looked, but let's just quickly draw a fib on that, on that move to see whereabouts we are. So it hasn't really respected it too much, but you can see here we reversed more than 50% of the move already, and I'm going to discuss why that's happened, and hopefully you managed to catch some of my commentary and tweets at the time. Because I definitely wasn't buying into the spike when it first happened. So let's get into the news. If you did want more charts and more from the technical side, obviously just reach out to Sam on Twitter, @snorth19 is his handle. But having a look here, let's have an update on the coronavirus. So I don't think it's particularly— from a market point of view, it's not going to move markets, but from a symbolic point of view, and absolutely, you know, absolutely a milestone of how severe that this pandemic has been. Total confirmed cases now have topped the 1 million mark globally, as you can see here on the left-hand side. The death toll's over 50,000 worldwide. Uh, the most hardest-hit country still remains that of Italy, just short of 14,000, followed by Spain. And then there's quite a significant drop down to then France and then Hubei province in China. Iran, and then the UK, followed by New York City, uh, actually New York City in itself. So absolutely, this number unfortunately continues to rise. The American confirmed cases now coming up to around a quarter million, and one would expect that to continue that pace for at least another 2 weeks, probably in that acceleration phase. So it's going to get unfortunately a lot worse before it gets better. Um, coming back to markets though, this is one of the things that of course, um, we were looking at yesterday. And initially you did see that kind of classic reaction. And you know, there was, um, if you actually go on the YouTube channel, I did actually post, um, a live running commentary I did over jobless. And there was a really nice point of entry to get short on oil at that point, to take about $2 out of the price where you had a really great risk-reward I know some of the guys in Trading Live, uh, were there at the time. And so not only was there equities, and the equity move was, you know, you need a little bit of patience. It took about 10 minutes really for it to gain a bit of traction before you saw a decent move actually. I mean, when you talk about the S&P, you are talking about what, from the initial release to the low, you know, decent 40-point move. So it's, that sounds small relative on the charts when you look at it because we're trading these, these new larger ranges. But that was a really good move. Um, what has happened? Well, this is the chart you remember me showing this time yesterday before the latest jobless numbers came out, and that was when we were looking at the first-time claims filed in the week to March 21st, and that was that 3.28 million we had last week. Well, now you can top that up. We had the number yesterday at 6.6 million, which basically means that 10 million people have now hit, you know, unemployed and are now searching in regards to benefits. And initial jobless claims have shot higher. And as you can see, this really is quite unprecedented. You know, even the peaks in the global financial crisis, you can see here, was at 665. The 1980s recession peak was just a touch above that at 695. And so to be up here at 10 million is just absolutely, uh, historical, uh, in this sense. And what does this mean then going forward? Well, obviously all eyes will be on payrolls now coming out in a few hours' time. The median consensus actually looks like it's been revised a little bit. Still though, looking for potentially the, the first negative print basically since 2010. As you can see here, the estimate on the street is for a minus 100,000 print. Now there are a couple things here to be aware of. First of all, I've mentioned this a few times, although since the macro menu that I send on a weekend, and that's about the reference period. So whenever, say, Nonfarm Payrolls is conducted, there's a distinct kind of calendar date cutoff of where the data goes up to. Now in this case, the reference period tends to be around the 12th, 13th of the month, meaning then that Basically, this data that we're going to see today in payrolls actually does not encapsulate the majority of the layoffs that we would have seen that have happened here, because this 10 million basically has happened after the date of which payrolls would have, would have hit its deadline, if that makes sense. So it's not going to capture the more widespread loss of employment, which we're definitely going to see in the April payrolls report. Which we'll talk about in a moment. A few other things here, I've made some notes from what I've been reading this morning. Obviously, non-farm payrolls is more than just one number. There's the unemployment rate, there's the average hourly earnings, there's revisions to previous numbers, and so on and so forth. Some of the key things here are wages and hours. They may be less reliable than usual because stretched and shut businesses might skip responding to the monthly survey. Now, why might they skip? Well, typically the numbers are based on voluntary responses from about 150,000 businesses and government agencies. So, you know, just given the stresses put upon these businesses, perhaps any voluntary submissions just haven't been able to be done. So the kind of accuracy of the data as well might be subject to a few, few questions, and meaning that later on down the line we could see quite significant revisions to previous data on the revision and the two-month net revision. Census workers are poised to add about 17,000 to the March payroll figure according to the Bureau's tally of temporary hiring. But, you know, 17,000 up in terms of employed is, is the next month going to be massively outweighed by the likelihood of multiple hundreds of thousands of people being unemployed. And with that being said, just wanted to give you a graphical or a kind of a visual cue of what did payrolls look like during the global financial crisis of 2008-2009. And as you can see here, there were periods of when job losses were down, and the kind of headline changing on farms was -800,000. Now today we're looking at a -100,000. I guess the question mark here, and it's, I mean, it's hard to to with any accuracy say this, but we are going to probably see some similar numbers to this, if not perhaps even more severe. So we're going to print down around here, and as you can see, even though we flirted and tested it a few times over the years in recent memory, the zero number— this is going to be the first negative print. But in all honesty, we're going to be about here on the marker come the end of today. Perhaps with a variation between, let's say, 0 and 300. But in next month's report, I would expect this to be all the way down in these areas here. And so again, yes, there's going to be volatility on today's number, but really, to get a better insight as to the economic real implications that this pandemic has had, that might not be forthcoming until the kind of next coming data in the weeks and months ahead. Just going back to payrolls then, the other thing that we're looking for is we are expecting— well, let's just have a quick look here what the unemployment rate currently looks like in the, in the US. So this is the— this is encapsulating the, again, the period of the financial crisis. So you can see here, if you like, they're, they're an inverse relationship, obviously. The amount of people, the change in non-farms has dropped, so the unemployment rises. So here you can see unemployment in financial crisis topped out at roughly around 10%. Before then, we've had this graduated— I'll just move it back here— pullback down to what has been prior to all this happening, despite a trade war and all these other things and fears of a recession already from 12 months ago. Unemployment rate in America was at record low territory. However, going forward, given how severe this is going to be, most people are anticipating now unemployment to rise into the mid-teens, that being over and above the worst of the unemployment situations seen in the kind of late '70s, early '80s, definitely above that of 10% of the financial crisis. I think that'll definitely be higher than that. So yeah, this is quite, uh, as I said, unprecedented in that sense. One thing to be aware of here is the, the U3 rate. There are a few different statistical nuances between how unemployment is measured, but the U3 rate is formally, as it's formally known, may fail to capture the full extent of unemployment which is the main unemployment figure that we'll look at, uh, because it only includes people actively looking for a job. Um, that means then that some of the other measures that come out as comprised as part of the payroll report, um, including the participation rate and employment population ratio, should also be looked at for a better gauge about how severe the decline in unemployment is. So remember, just to make that clear, and do just jump on or leave me a, um, a question on the video or just go on to Investopedia if if you type in U3 unemployment rate, it will make a bit more sense. But essentially, it's people who are actively looking for a job. But if you're self-contained and you're self-isolating, then, well, then how can you be out looking for a job? So it's a little bit difficult to really harness that, that data to get a true reading of really what the underlying situation is. It could underplay it, which is where you've got to look at the participation ratio to get a better idea of of how accurate that unemployment rate is. The idea here then, from a broader economic and trading perspective, I saw this this morning. I thought this was excellent because I definitely did a few tweets and I did a post on LinkedIn about some thoughts about what I feel about the, the virus going forward, more kind of medium term. And this I thought was quite interesting because this is mapping at the left-hand side here, 2008 versus 2020. And the, uh, the blue line here is the S&P 500 during the era of the depths of the financial crisis. And the red line here, that kind of solid red line, is the movement we've had in the S&P 500 through the beginning of this year. And then the trajectory of what this particular bank is looking at under two different scenarios. Scenario 1, their bull case, the outbreak peaks within the next 2 to 4 weeks, or their base case, a prolonged virus outbreak. And for me, this virus to peak and then we kind of be, you know, back on track again in the next 2 to 4 weeks, I think is absolutely not going to happen. I'm way more bearish than that, I would say. I think this is going to be much more protracted than— than people are definitely underestimating this. One of the things I was talking about Yesterday on Twitter, if I just quickly jump to it, there was a really good piece I saw. I know this is a bit small to see, but let me read it out to you. This was in the Harvard Business Review, and I just thought it's something we've talked about in the briefing a lot, but it really summarizes it quite well. And it's talking about people's somewhat almost complacency about just getting in control. The peak virus means that's the end, markets recover. For me, these points really are really, again, say it all. The virus properties are not fully understood and could change. The role of asymptomatic patients is still imperfectly understood. The true rates of infection and immunity are therefore uncertain, especially when testing is limited. Policy responses will be uneven, often delayed, and there will be missteps. And the reactions of firms and households are uncertain. And then another bullet point I think is You know, I've spoken to a couple of people who are small business owners, and they have really struggled where, you know, if you think about it, the government needs to stop the rot in markets. Uh, 2 weeks ago, markets were in freefall, record-breaking levels of volatility, and predominantly to the downside when we're looking at equity markets. Massive stress on the market might not immediately impact the guy on the street, but it certainly will do if it then is a trigger point to lead to a severe recession at that point. So governments have to come out and act. They have to, in order to try to control this runaway market before it even gets worse and the economic implications start to build even further. The problem they have then is the implementation. So when we talk about these stimulus measures and how they're going to help small and medium-sized enterprises Well, that's all well and good, but these small businesses can only survive for a very, very finite short period of time. And without actually getting that available credit quickly, they can no longer exist and people get laid off and unemployed. And this is what was leading to these massive losses of jobs and these big spikes in jobless claims that we're seeing. So yeah, that and the fact that, you know, this isn't a crisis born out of subprime or this kind of these investment vehicles or speculation. This is a pandemic. And for me, I do think that trying to harness then a virus which is still not really fully understood, the scientists still don't have a solution definitively yet, and scientific research takes time in terms of finding a full-on vaccine. So yeah, I As you can tell, I'm a little bit bearish still on the kind of— I'm not bearish as in I'm this massive bear. It's more of a view of I just think this notion that we're going to have a quick getting over of this, I think is misplaced. Now with that, here was a good— this is where I saw these good graphics that really show 3 things. The kind of shape of recovery, and they were using as a case study 2008. And here you've got the V-shaped recovery that was witnessed in Canada, who really averted a kind of recession during the global financial crisis. And through the advent of kind of forward guidance— and this was where Mark Carney did such an excellent job before he became the Bank of England governor— they managed to basically have pre-crisis growth and actual growth track almost identical. So despite the little blip that you can see here, it's almost difficult to see, uh, they just continued on track, uh, as productivity grew with just the general business cycle over time. In America, we have now managed in recent years to basically run parallel to the pre-crisis growth trend, albeit off where we were. So we've kind of been put off track and just gone down a separate road, if you like. But then for Greece, I mean, this is the L-shape, and this is kind of the worst case where economically it's still been— not only was it massively damaging, it continues to have impeded their ability to grow to anywhere near their pre-crisis growth levels. So obviously, these ones are much more precarious economically, fiscally, in these types of situations. So yeah, this is what we're looking at when we're looking at the unemployment rate. Remember, workers exit the workforce, skills are lost, and productivity goes down. So the bigger, um, the more these jobless claims start coming out, and let's say next week is another 6 million, then another 6 million, the unemployment rate goes from 8 to 10 to 12 to 15, all the more difficult it becomes to see this type of V and U shape, and we start going down into more, I guess, not quite as perhaps as severe when it comes to something like, like the United States as an L-shape, because don't forget they are doing these mammoth stimulus packages. But again, the, the longer-term implications that you can derive here from an investment point of view, from what we're seeing from these jobs data, as well as the short-term intraday to be able to trade the volatility. All right, final few things I just really want to cover off. This was yesterday You might have seen me tweeting about this because I just— it was a crazy move when it happened. So basically Trump tweeted, as he does, and he basically said that he's eyeing a global oil output cut of 10 million barrels a day. You know, I can almost imagine it. Trump's probably sat there in the White House, he's got his Bloomberg terminal, and And he's like, right, okay. Uh, Whiting Petroleum filed for bank chapter 11 yesterday, right? This is really going to be bad. Now we know the virus is getting worse, uh, all around the nation. I'm going to have to start intervening now in this oil price. Otherwise it's going to go from $20 to $16 to $10 pretty quickly. And then we're going to have mass unemployment in the oil and gas industry, right? Tweet, bang, $10 million. We're going to cut global. I've had a conversation with Russia and Saudi. We're all talking again. Market responds as it should do, spikes higher aggressively. Trump then goes, wow, oh my God, look, it's just spiked 25%. You know what, I'll tweet again. Actually, not 10, 15. He actually did that. And when he did that, I knew that this was just absolute BS. And so that's why I was quite critical at the time. And actually you know, when it spiked up to— where do we get to in oil? We— I think we got up to about— let me just transition my chart here. We spiked all the way up to $27.39, and then we came all the way tearing back down not that long after to $24.13. And I just couldn't, you know, I couldn't believe this was such a— this was such a basic error, I think, on behalf of Trump, that second tweet. He just couldn't help himself because it's one of those things where markets move on expectations, not reality, in a sense, because there's no cut that's happened so far. He's just saying these things and the market instantly prices that in. Now, when he went from 10 to 15, now that doesn't sound like a lot, okay, 10, 15, but actually that's you know, another $5 million. So that's 50% of the entire cut that you've just been talking about being bolted on the top. So that's a massive difference. And for me, when you— having spent, you know, the last 14-odd years watching the way that news comes out, whenever I hear a comment like that, for me, then how I remain, I guess, rational or look for the trade is that trying to capture that tweet and that initial explosive move is pretty impossible. To be fair, is so quick. And there are, you know, algos hooked up to trade that sort of thing, and you're never going to get really a hold of it in time. But then for me it comes, well, hang about, Trump is saying this, you know, no one else is saying this. And for me then the one thing that did come out was a third comment, which was that Saudi officials reportedly were looking to call for an emergency OPEC+ meeting. That was when we hit the eventual top. But for me, where's Russia? And Russia were not forthcoming. And then it became apparent then, uh, that, that basically they weren't talking. Um, let me read you through this. So, so how it came out was a second person familiar with the situation said Trump's goal is purely aspirational. And will ultimately hinge on whether Saudi and Russia reach a deal. An OPEC+ delegate familiar with the conversation similarly said Saudi Arabia and Russia had yet to agree a production cut, let alone its size. Any proposed cuts would be conditioned upon other major oil producers also agreeing to reduce production. So, you know, think about it from a political point of view, a management point of view. You know, you've just had one a big oil firm going to bankruptcy yesterday for Trump. Trump, remember, is scheduled to meet with the likes of Exxon, Chevron, the big oil majors today. So going into this, he wants to, you know, promote a figure of strength, if you like. And so out come the comments. But at the end of the day, we remain exactly where we were, you know, without Russia and Saudi sorting this out. This price spike is not going to be long-lasting. So we are getting closer to that point, don't get me wrong. Um, you know, the fact that we, we've come as far as we have— I mean, if I start looking here on the 90-minute, this is where we had that OPEC meeting. You remember they failed to see eye to eye, they didn't cut. Markets saw an aggressive gap down, and, and that was when the Saudis were saying they were going to flood the market and discount prices Then we had that temporary reprieve on the back of the US saying, well, we're going to buy oil and top up the SPR. Didn't last long. And if you look where we are now, we've come up to the, the, the top of, of that range that we were in, uh, really last week. Had a brief break through that, but it's going to be interesting to see. It's quite key where we're really trading at the moment. But all of this for me still hinges on really the Russians being more forthcoming. The Saudis, we know have been a little bit more open to the idea that they want action. It's the Russians that haven't agreed at this point. And some of the latest I've seen this morning is OPEC+ reportedly to hold a meeting next week, said to be Monday, uh, according to a few people, um, it's kind of journalists who, who monitor and track the, the behind closed doors conversations. So yeah, um, hopefully that, that I hope that helps. I mean, as far as today's calendar is concerned, um, yeah, it's all dominated by the afternoon. There's a few things coming out this morning, but quite frankly, it probably doesn't even warrant me commenting on. I think these service numbers are all final ones. Probably the one perhaps that you can keep an eye on will be the service PMI coming out of the UK, just given the composition of our economy and And the service one in the UK does be, uh, tend to be market moving, and that is expected to be 34.8, uh, down from a 53.2 reading. So a severe hit, uh, of course, to that figure. Um, and then the payrolls report. So again, the registration link will be in the chat, so check that out, and hopefully I'll see you a bit later on this afternoon. Okay guys, that is it. Enjoy your weekend, and any questions, just leave a comment in the video. Thanks very much.