For each of the past 3 months, non-farm payrolls has fallen by more than -650k. In December, payrolls dropped 681k, which at that time was the biggest single month contraction in job growth since 1945. Based upon the ADP employment report, the Challenger layoffs report and weekly jobless claims, traders should brace for an even sharper decline in March payrolls.

Private sector employment fell by 742k this month and the scary thing is that ADP historically underestimates payrolls. According to Challenger, layoffs rose 180.7 percent while weekly jobless claims exceeded 650k three out of the past four weeks. The only silver lining would have to come from the public sector, but there is little chance that the increase in government jobs would be more than 10k or 20k.

This time around, we do not have the luxury of using the employment report of service sector ISM as a leading indicator for NFPs, but everything else points to the biggest contraction in the labor market in more than 6 decades.

If payrolls fall by more than 700k, the dollar could actually rally because the dollar is trading on risk appetite and not economic data. I will be publishing a Non-Farm Payroll Preview tomorrow on FX360.com

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