Financial markets, including the cryptocurrency sector, could face significant turbulence on Wednesday, as the U.S. economy’s health comes under scrutiny with the release of updated labor market data.
What Happened: The U.S. Bureau of Labor Statistics (BLS) is set to publish a preliminary estimate of revisions to nonfarm payrolls, covering the period from April 2023 to March 2024—a report that could reshape market sentiment.
However, Goldman Sachs GS is urging caution, suggesting that the anticipated data may paint an overly pessimistic picture of the U.S. job market, Coindesk reported.
The investment bank has flagged the potential for the revised figures to overstate economic weakness, a concern for investors closely watching the impact on risk assets like Bitcoin BTC/USD.
The forthcoming BLS revision is expected to reveal that job growth during the year leading up to March was slower than initially reported.
Morgan Stanley MS predicts a substantial downward adjustment, estimating payrolls could be revised down by as much as 600,000 jobs—equivalent to 50,000 fewer jobs per month over the 12-month period.
This anticipated drop could reignite fears of a looming recession, prompting a shift away from riskier investments, including cryptocurrencies, and sparking a move towards safer assets.
The market reaction could mirror the response to the July jobs report, which similarly stoked concerns about the economic outlook.
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Why It Matters: Goldman Sachs cautions that these revisions may not tell the whole story.
“Nonfarm payroll growth averaged 250,000 jobs per month from April 2023 to March 2024,” Goldman Sachs’ Economics Research team stated in an Aug. 16 note to clients. “While the revision on Wednesday could lower this pace to 165,000-200,000 jobs per month, we believe part of that revision will be erroneous, and the ‘true’ pace of employment growth was likely closer to 200,000-240,000 jobs per month.”
The bank attributes the potential inaccuracies to the data’s reliance on the quarterly consensus of employment and wages (QECW), which is informed by unemployment insurance records.
These records, crucially, do not account for undocumented workers, who have played a significant role in job creation in recent years.
Following the release of the BLS data, attention will turn to the minutes from the Federal Reserve’s July meeting, due at 18:00 UTC.
These minutes could provide further insight into the central bank’s monetary policy strategy, with market participants keen to understand the reasoning behind the Fed’s decision to wait until September before considering any easing measures.
“We will look for why the FOMC wanted to wait until September to consider easing monetary policy and if a 50bp [rate] cut was discussed,” Morgan Stanley noted in a separate communication to clients on Aug. 18.
As the financial world braces for these developments, the broader implications for the cryptocurrency market will be a key topic of discussion at the upcoming Benzinga Future of Digital Assets event on Nov. 19.
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