Opinion: This Week's Employment Data Will Further Confirm the Fed's Rate-Cutting Trend
BlockBeats News, September 1st, this Friday the U.S. will release the August seasonally adjusted non-farm payroll report. A survey of top economists by The Wall Street Journal shows that the expected job creation for last month is only 75,000, and the unemployment rate may rise from 4.2% to 4.3%, reaching a near four-year high.
Bill Adams, Chief Economist at U.S. Bank, stated that for the financial markets, the best-case scenario is for the upcoming employment report to show moderate job growth and a slight increase in the unemployment rate. This would indicate that the economy is not in a recession but also show enough labor market softness to justify the Fed's rate cut.
On the other hand, the worst-case scenario is if the employment report shows a decrease in job numbers, a drop in the labor force participation rate, and a decline in the unemployment rate. This would mean a decrease in labor supply while labor demand is also weakening, posing a problem that the Fed may not be able to address.
With the Fed likely to cut rates in September, investors will once again begin to assess when "bad news is good news" and when "bad news is just bad news." In other words, when will weak economic data provide the Fed with further room for rate cuts (bullish for the stock market), and when will weak economic data trigger growth concerns (bearish for the stock market)? This may boil down to why the Fed is cutting rates and what will happen after the rate cut. (FX168)
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