Is the US Labour market heading for winter? NFP insights and Nasdaq analysis

The US Non-Farm Payrolls are back in traders’ spotlight. While all NFP data is interesting, this month’s reading draws more attention as the unemployment rate broke new 2023 ground last month, and not for the better. Keep reading as we explore the recent changes in the US labour markets and their implications for the Nasdaq 100.   
 

Is the US labour market heading for winter? 
 

If the US ADP Employment Change is of any guidance, then the US labour market is heading for winter. The US economy added 298K new jobs in the last three months vs. the 947K new jobs in the prior three months, a staggering 68% drop.   
 

The official labour market data, the Non-Farm Payrolls (NFP), is patchier, with the November NFP showing that the US economy added 150K new jobs, following the strong October reading of 336K. However, what data series should we trust?  
 

The take on the street is that the ADP is more reliable and that the NFPs are prone to substantial revisions.  Thus, if we focus on the ADP, the next months will be interesting for the US economy.  
 

The unemployment rate has also increased. At the start of 2023, the rate reached a multi-year low of 3.4%, while the upper level was 3.7% during the year. Yet, in the last month, the unemployment rate punched through that level and reached 3.9%. 
 

The weakening of the labour market is expected by both the Fed and the investors.However, if we see the NFP drop off too much this week or the unemployment rate spikes higher, it should send shivers across financial markets.   
 

The Federal Reserve is trying to engineer a soft landing. However, if the NFPs experience a dramatic downturn it could be a sign that they kept rates too high for too long, and while they will cut interest rates at that point, it will likely be too little and too late to maintain the bullish mood of investors.   
 

Nasdaq 100 sensitivity is heightened after strong bullish push 
 

The Nasdaq 100 could be one of the more impacted markets in case of very soft NFP figures, as the index has risen by 15% from its October low without any significant correction.   
 

Applying a simple Fibonacci tool suggests the price could find support between 14877 and 15379. Would a drop to the beforementioned be enough to derail the annual Christmas rally? It would not. For that to happen the price would need to trade below the October low of 14066.  
 

Nasdaq 100 daily chart 
 

What could happen if the NFPs are too strong?  
 

In theory, that should also be bad for the Nasdaq 100 as it forces the Fed to remain hawkish. Thus, the best scenario for the Nasdaq 100 this Friday would be to have neither strong nor weak figures.  
 

The latest expectations are for the NFP to increase by 185K and for the unemployment rate to remain unchanged. Trade your take on the markets. Get the latest figures and estimates directly in your free ThinkTrader web account.Open an account today!