Today’s employment report is expected to extend the weakest stretch of job growth since the pandemic, likely locking in a Federal Reserve interest rate cut.
Non-farm payrolls are forecasted to grow by 75,000 in August, the fourth consecutive month of job growth below 100,000. The unemployment rate is seen rising to 4.3%–the highest level since 2021.
Hiring has materially cooled in recent months as companies navigate concerns about demand, higher costs and lingering economic uncertainty because of tariffs. In many regards the labor market is frozen…it is not showing great weakness nor great strength but one of great uncertainty.
With inflation still firm and the labor market is weakening, policy makers are in a difficult spot with their mandates of full employment and stable prices pulling the Committee in opposite directions.
Yesterday’s data did little to change monetary policy expectations, which still suggest a 90% chance of a reduction at the September meeting. The ADP Private Sector Employment Survey was weaker than expected.
However, the ISM Service Index expanded in August at the fastest pace in six months on the sharpest acceleration in new orders in nearly a year. This solid advance suggests the largest part of the economy is gaining some traction after five straight months of sluggishness.
Markets yesterday were relatively quiet heading into today’s employment report. Treasuries rallied across the curve causing a nominal steepening move. Equites were up about 0.80% on monetary policy optimism.
Last night the foreign markets were up. London was up 0.31%, Paris up 0.29% and Frankfurt up 0.21%. China was up 1.24%, Japan up 1.03% and Hang Seng up 1.43%.
Futures are up about 0.3% on rate cut optimism, believing the payroll data will not surprise on the upside. The 10-year is up 2/32 to yield 4.16%.
