Release time: Friday, December 5, 2008 — 8:30 AM EST

Experts and analysts alike agree that this Friday’s Non Farm Payroll report is expected to contain significant job reductions. The only question is how large will the declines be. New claims for unemployment have surged above 500,000 and it’s not just the large corporations retrenching. Recent data indicates that small businesses are cutting back now as well. Employment conditions are continuing to worsen and the larger declines in September and October are fueling fears that we are seeing the establishment of a new trend.

The unemployment rate is expected to increase as a result. Registering 6.1 percent in August, unemployment is expected to reach 6.7% - 6.9%, up from last month’s 6.5%. We are entering into regions that we haven’t seen since late 1994.
For week ending November 22, the Labor Department reported that the advance figure for seasonally adjusted initial claims was 529,000, a decrease of 14,000 from the previous week’s revised figure of 543,000. They also reported a four-week moving average of 518,000, an increase of 11,000 from the previous week’s revised average of 507,000.

Recent economic releases echo the U.S.’s economic stress. U.S. manufacturing saw new orders fall to the lowest since 1980, down to 27.9 in November from 32.2 in October. Readings below 50 indicate a contraction in the manufacturing sector. Pierre Ellis, senior economist with Decision Economics in New York said “(The ISM report) emphasizes the general rapid slowdown in inflation. The economy is falling more sharply and to a greater depth than earlier perceived and the effect on prices is more immediate. Price adjustments is what will ultimately bring the economy back but the immediate pain is severe.”

The one bright spot this month was the post Thanksgiving holiday spend up. Black Friday sales were estimated at 3% over last year’s numbers. ShopperTrak said in a report Saturday that preliminary sales for Black Friday totaled $10.6 billion. Separately, the National Retail Federation’s shopper survey reported on Sunday that average spending over the Black Friday weekend - both at physical stores and online - rose 7.25% from last year.

What is the NFP report?
Of all the world monthly economic reports, the monthly U.S. Non Farm Report (NFP) is the most highly anticipated and has the most dramatic impact on the currency market.

The report, which is released on the first Friday of each month and states the previous month’s numbers, provides detailed industry data on employment, hours and earnings of workers on nonfarm payrolls. These numbers are the best way to gauge the current state of the US market as well as the direction that the economy is heading.

What’s more, the employment numbers provided by the report are used by the Fed to shape their interest rate policies. The health of the U.S. economy and interest rates translate to the strength or weakness of the U.S. dollar.

by Todd B. Crosland

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