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US and world markets are focused on today, when critical data will be released. Nonfarm payrolls and unemployment data for August, which will be released at 15:30 GMT, are of great importance in terms of the Federal Reserve’s (Fed) interest rate decision on September 18. Markets are trying to predict what steps the Fed will take regarding monetary policy based on the results of this data.
Fed Expectations and Possible Moves
Markets expect 161,000 new jobs to be created in nonfarm payrolls data and the unemployment rate to fall to 4.2% (previously 4.3%). This data is expected to be decisive in determining whether the Fed will continue its tight monetary policy.
What Could Happen If Fed Data Comes Below Expectations?
The recent release of lower-than-expected data by the US economy has raised fears of a recession. If the employment data to be released today also falls short of expectations, the possibility of a 50 basis point rate cut at the Fed’s September meeting may increase. While the continuation of high interest rates slows down the US economy, weak employment data may necessitate a step back from this tight monetary policy.
Contrary to the 185 thousand new jobs expected in July, only 114 thousand people were employed. This led to the first serious recession concerns in the US. In addition, the unemployment rate was announced as 4.3%, above expectations, reaching its highest level since October 2021.
Signals of a Slowdown in the Economy: Manufacturing and JOLTS Data
Other data released this week also showed that the economy is slowing down. The Manufacturing Industry PMI data and the JOLTS job openings number were well below expectations. The low JOLTS data in particular was welcomed positively by the markets and increased the expectation that the Fed may cut interest rates.
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As the Fed closely monitors developments in the labor market, the possibility of a 50 basis point rate cut has gained strength following the JOLTS data. Markets are currently pricing in a 45% chance of a 50 basis point rate cut on September 18, and a 55% chance of a 25 basis point cut.
This data will directly affect the Fed’s future policy actions and determine the direction of the markets.
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