With the Federal Reserve gaining confidence that inflation is heading toward its 2% goal, the employment side of the central bank's dual mandate has
jumped into focus. That puts today's jobs report in the spotlight and may help FOMC policymakers decide by how much to cut their benchmark rate at the next Fed meeting. The highly-watched gathering is only two weeks away, and it's one of the last remaining data points before then, along with the CPI reading next week.
Stimulate the economy? Traders are leaning toward a 25 basis-point cut at the powwow on Sept. 17-18, with a 59% probability that the rate will drop to 5.00%-5.25% from the current 5.25%-5.50%. That puts the odds of a 50 bps cut at 41%, according to the CME's FedWatch Tool. Those probabilities have fluctuated largely over the past month as data has continuously been digested, but things are now getting extremely close to showtime, especially after the
big revisions seen only two weeks ago.
Today's consensus estimate for the number of jobs added to U.S. nonfarm payrolls in August is 164K, up from July's initial estimate of 114K, which spooked markets as it was well below the consensus of 180K. However, a couple of temporary factors that led to the soft numbers are no longer in the equation, like Hurricane Beryl in Texas and the retooling of vehicle factories in Michigan. The unemployment rate is also expected to have inched down to 4.2% last month, from a nearly three-year high of 4.3%, while wage growth doesn't appear to be as much of a concern as it was a year ago.
What to watch: SA Analyst Damir Tokic will be looking at
three facets of the August report: 1) the change in labor force vs. the change in unemployed people in the household survey. As long as the number of unemployed people doesn't increase, the recession continues to be delayed; 2) jobs in the leisure/hospitality and construction sectors. Both added ~25K jobs in July. As long as those cyclical sectors add jobs, the recession is delayed; 3) revision to the nonfarm payrolls. If the nonfarm payroll number is revised lower, that's a negative signal. (
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