Will the crypto market crash after the release of US employment data

The crypto market has been on a wild ride, with prices plummeting and recovering in dramatic fashion in response to various economic indicators. As investors and enthusiasts navigate this unpredictable landscape, all eyes are on the upcoming US job data release. The community remains anxious as a weaker job data could result in increased volatility.

Notably, initial jobless claims surged to their highest level of the year last week, potentially signaling a slowdown in the labor market. With President Donald Trump reducing the government workforce, a weaker jobs report is expected. Let’s uncover how the upcoming jobs report could influence the crypto market.

US dollar: Non farm payroll report may become a key turning point

In the past week, the performance of the US dollar against major currencies has been relatively weak, partly due to market expectations of future interest rate cuts by the Federal Reserve (FOMC). The latest data shows that investors currently expect the Federal Reserve to cut interest rates by 60 basis points in 2025, higher than the 50 basis points implied by the dot matrix in December last year. However, the upcoming US non farm payroll data on Friday, March 7th, may have a significant impact on market expectations.

1. The resilience of the job market remains, but downward pressure is gradually emerging
The non farm payroll data for January was lower than expected, with only 143000 new jobs added. However, due to the significant upward revision of the December data, the market remains cautiously optimistic about the overall health of the job market. The unemployment rate has dropped to 4.0%, and the average hourly wage growth rate has remained at 4.1%, indicating that wage pressure is still significant. At the same time, the ADP report shows that the private sector added 183000 new jobs, indicating that companies still have some recruitment demand.

What is the impact of government layoffs?
Recently, due to the ongoing government layoffs (DOGE plan), the market expects that the number of non farm new jobs in February may still face downward pressure. But if private sector employment data can remain strong, it may offset the impact of government departments and drive the recovery of the US dollar.

3. The game of market expectations
If the overall performance of non farm payroll data is strong, the market may readjust its expectations for the Fed's interest rate cuts, thereby boosting the US dollar and US Treasury yields, putting pressure on safe haven assets such as gold. On the contrary, if employment growth slows down significantly, the market may increase its bets on a larger rate cut by the Federal Reserve this year, putting greater pressure on the US dollar.

Is a Weaker US Jobs Data Ahead?

According to a Labor Department report on Thursday, new jobless claims jumped to 242,000 for the week ending February 22, surpassing expectations and reaching the highest level of 2023. The latest data hints at a slowdown in the labor market, potentially leading to the Federal Reserve’s interest rate cuts.

Notably, jobless claims for the week ended February 22 jumped by 22,000 to 242,000, exceeding analysts’ forecasts of 225,000. Washington, D.C. saw a significant surge in new unemployment claims, totaling 2,047, which marks a 26% increase from the previous week. Unemployment filings in Massachusetts jumped by 3,731 to 9,179, while Rhode Island saw claims skyrocket by more than 200% to 2,964.

All these inputs suggest that the upcoming US jobs data will report a weaker employment data, potentially leading to a significant Fed decision and a crypto market volatility.

How Will the US Jobs Data Impact Federal Reserve’s Interest Rate Decision?

Interestingly, the US employment data is a critical factor that significantly influences the Federal Reserve’s decision on interest rates. If the upcoming US jobs data reveals an increased unemployment rate, there is a higher possibility for the Federal Reserve to reduce interest rates. On the other hand, a strong job market can fuel inflation, prompting the Federal Reserve to take action to curb it, which may delay interest rate cuts.

Additionally, the significant decline in the US consumer confidence in February has sparked anticipations of Fed’s interest rate cuts in June and September. The Conference Board survey revealed that the consumer confidence drop marked the sharpest in 3.5 years largely driven by growing concerns over President Donald Trump’s economic policies.

Further fueling speculations, Raphael Bostic, the President of the Atlanta Federal Reserve, shared his insights on the Fed’s possible moves. He stated that the Fed will reduce interest rates twice this year while some factors could affect the decision. He posited, “While that’s my baseline expectation, there’s a lot that is going to happen that could influence that really in both directions.”

Will the Crypto Market See Another Turmoil?

Over the past few weeks, the crypto market has been experiencing vast changes, with prices of top cryptocurrencies like Bitcoin and Ethereum fluctuating rapidly. With anticipations of slower US jobs data, the market is expected to have a resurgence despite volatility.

As President Donald Trump is reducing the government workforce through Elon Musk’s Department of Government Efficiency, there is a higher chance for an increased unemployment rate. This could push the Fed to further reduce interest rates, paving the way for a stronger crypto market.