On September 1st, the US will announce the seasonally adjusted non-farm payrolls for August this Friday. A survey by The Wall Street Journal of top economists shows that last month's new jobs are expected to be only 75,000, and the unemployment rate may rise from 4.2% to 4.3%, reaching a nearly four-year high. Bill Adams, chief economist at United Bank of America, stated that for the financial markets, the best scenario would be for the upcoming employment report to show moderate job growth and a slight increase in the unemployment rate. This would indicate that the economy has not fallen into recession but also shows that the labor market is weak enough to justify the Fed's interest rate cuts. On the other hand, the worst-case scenario is that the employment report shows a decline in jobs, a decrease in labor force participation, and a drop in the unemployment rate. This would mean a decrease in labor supply while labor demand is also weakening, which could be a problem the Fed cannot address. As the Fed is likely to cut interest rates in September, investors will begin to reassess 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 more room to cut rates (favorable for the stock market), and when will weak economic data trigger growth panic (unfavorable for the stock market)? This could boil down to why the Fed needs to cut rates and what will happen after the cuts. (Jin10)
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Viewpoint: This week's employment data will further confirm the Fed's trend of interest rate cuts.
On September 1st, the US will announce the seasonally adjusted non-farm payrolls for August this Friday. A survey by The Wall Street Journal of top economists shows that last month's new jobs are expected to be only 75,000, and the unemployment rate may rise from 4.2% to 4.3%, reaching a nearly four-year high. Bill Adams, chief economist at United Bank of America, stated that for the financial markets, the best scenario would be for the upcoming employment report to show moderate job growth and a slight increase in the unemployment rate. This would indicate that the economy has not fallen into recession but also shows that the labor market is weak enough to justify the Fed's interest rate cuts. On the other hand, the worst-case scenario is that the employment report shows a decline in jobs, a decrease in labor force participation, and a drop in the unemployment rate. This would mean a decrease in labor supply while labor demand is also weakening, which could be a problem the Fed cannot address. As the Fed is likely to cut interest rates in September, investors will begin to reassess 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 more room to cut rates (favorable for the stock market), and when will weak economic data trigger growth panic (unfavorable for the stock market)? This could boil down to why the Fed needs to cut rates and what will happen after the cuts. (Jin10)