August Jobs Report Set To Move Markets: A Turning Point For Fed Policy?

After a week packed with economic updates, the most eagerly awaited report is slated for release this Friday at 8:30 a.m. ET.

We’re talking about the Bureau of Labor Statistics’ August jobs report, which measures monthly changes in employment growth, unemployment rate, and pay dynamics.

Investors are keeping a close eye on the report because of its critical role in predicting the Fed’s future actions.

What Do Economists Expect From The August Jobs Report?

• Non-farm payroll growth is predicted to slow from July’s 187,000 to August’s 170,000. If NFPs pan out as expected, it will be the slowest rate of employment expansion since December 2020. Furthermore, it will be lower than the average monthly increase in non-farm payrolls over the past 6 months, which has been roughly 226,000.

• The unemployment rate is predicted to remain stable at 3.5%, close to the multi-decade low of 3.4% reached in April and January 2023.

• The growth in average hourly earnings is predicted to be steady at 4.4% annually in August 2023, with a monthly rate of 0.3% (down from 0.4% in July).

What Are the Most Recent Tendencies in the U.S. Job Market?

Recent statistics suggests that the tightness in the U.S. job market that has been there since the pandemic recovery has started to ease lately.

In July 2023, the number of job openings fell to 8.827 million, a decline of 338,000 from the prior month and falling below economists’ expectations of 9.465 million.

In August 2023, U.S. private businesses hired 177,000 workers, according to the Automated Data Processing, Inc. (ADP) National Employment Report, the fewest in five months. The print was below market estimates of a 195,000 rise and July’s revised 371,000 increase.

According to the latest Challenger Report by Challenger, Gray & Christmas, Inc., U.S.-based companies disclosed 75,151 job cutbacks in August 2023, the highest in three months and a 217% increase from the previous month’s 11-month low of 23,697 cuts.

How To Read The Data

If non-farm payrolls come in higher than projected, it will be another piece of evidence that the U.S. labor market is healthy and tight, and the Fed will continue to be laser-focused on fighting inflation.

As a result, investors may reevaluate their rate hike predictions, possibly increasing their wagers on further raises and perhaps bringing forward their projections for rate cuts in 2024.

This will likely have a negative effect on markets while strengthening the dollar. We may expect the Invesco DB USD Index Bullish Fund ETF UUP to outperform risky assets such as the SPDR S&P 500 ETF Trust SPY.

If the number comes in lower than predicted, the market is more likely to believe that the Fed will decide to leave interest rates unchanged, which would keep the bullish momentum going as we near the end of this rate-hike cycle.

Read now: Fed’s Favored Inflation Gauge Matches Expectations: July PCE Price Index Inches Up To 3.3%

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