Why Nonfarm Payrolls Cannot Be Fully Trusted?

[Ben Graham]

Generally, markets react very sensitively to Nonfarm Payrolls reports and often show indifference to unemployment reports. For example, the data for these two indicators in November did not cause a significant decline in the U.S. dollar. In my opinion, this represents another market oversight suggesting a future decline of the American currency.

Nonfarm Payrolls reports do not always account for all new jobs created. In the 21st century, some professions are extremely difficult to quantify. For instance, any form of freelancing or piecework employment. Nowadays, every second person is a blogger, managing their accounts on YouTube or similar platforms. Many people simply take on various orders on freelance exchanges. How can we count them, and how can we calculate that?

Even Jerome Powell has spoken about the issues with the Nonfarm Payrolls indicator. According to him, the actual labor market data may be lower than the official statistics. Some reports suggest that the American labor market has been losing 20,000 to 30,000 jobs since the spring of 2025. Clearly, these are unofficial statistics, but one must concede that such an assumption has merit.

I consider the unemployment rate to be a much more important indicator. If the labor market began to "cool down" only at the end of summer, the unemployment rate has been rising since January 2023. Consequently, problems in the labor market have been emerging for two years. It is obvious that the unemployment rate reflects the labor market situation more accurately because when an individual loses their job and cannot support themselves, they apply for unemployment benefits. As a result, new jobs might be created (according to Nonfarm Payrolls), even up to 600,000, but if 800,000 Americans lost their jobs during the same period, the unemployment rate would still increase. This is why payroll figures are not the most accurate indicator, just as the ADP or JOLTs reports are.

Since unemployment has been rising for 2 years, it is easy to speculate that the labor market is continuing to "cool down." If this assumption is correct, the FOMC's interest rate cuts will continue into 2026. With weak inflation, the cuts will happen sooner; with high inflation, they will occur more slowly. For the U.S. dollar, this is undoubtedly bad news.

Wave Structure of EUR/USD:

Based on the conducted analysis of EUR/USD, I conclude that the instrument continues to build the bullish segment of the trend. Donald Trump's policies and the Fed's monetary policy remain significant factors in the long-term decline of the American currency. The targets of the current trend segment may stretch up to the 25th figure. The current upward wave pattern is starting to show development, and it is hoped that we are now witnessing the formation of an impulse wave set that is part of the global wave 5. In this case, we should expect growth towards targets around 1.1825 and 1.1926, corresponding to 200.0% and 261.8% on the Fibonacci retracement.

Wave Structure of GBP/USD:

The wave structure of the GBP/USD instrument has changed. The downward corrective structure a-b-c-d-e in C of 4 appears to be complete, as does the entire wave 4. If this is indeed the case, I expect the primary trend segment to resume its development, with initial targets around the 38 and 40 levels.

In the short term, I anticipated the formation of wave 3 or c, with targets around the 1.3280 and 1.3360 marks, corresponding to 76.4% and 61.8% on the Fibonacci retracement. These targets have been reached. Wave 3 or c continues its formation, and currently, a fourth attempt to break the 1.3450 mark (equating to 61.8% on the Fibonacci retracement) is underway. Movement targets are 1.3550 and 1.3720.

Core Principles of My Analysis:

1. Wave structures should be simple and understandable. Complex structures are difficult to trade and often require adjustments.
2. If there is uncertainty about what is happening in the market, it is better not to enter it.
3. There is never 100% certainty in the direction of movement, and there never can be. Don't forget about protective stop-loss orders.
4. Wave analysis can be combined with other forms of analysis and trading strategies.

The material has been provided by InstaForex Company - www.instaforex.com