Week ahead: US labour data and the BoC rate announcement in focused
US employment situation report
Bank of Canada (BoC) rate announcement
US jobs data
With US Federal Reserve (Fed) Chair Jerome Powell’s recent speech at the Jackson Hole Symposium confirming that it is time to begin easing policy as well as underlining the importance of the jobs market, this week’s jobs data may help determine how the Fed approaches its easing cycle. Markets are pricing in -33 basis points of easing for September’s meeting. To put that into perspective, there is a 70% probability of a 25 basis point rate cut in September over a 30% chance of a 50 basis point cut. Additionally, investors still forecast -100 basis points of cuts for the entire year (four rate cuts).
Friday’s US employment situation report is key at 12:30 pm GMT. This follows the broad downside surprises across key measures for July (2024), triggering declines in US Treasury yields and the US dollar (USD). According to the Reuters poll, the median estimate for the August non-farm payrolls report indicates 163,000 jobs were added to the US economy, up from 114,000 in July. The unemployment rate for August is expected to ease to +4.2% from +4.3% in July, while average hourly earnings wage growth is estimated to modestly increase in August on both month-on-month and year-on-year measures to +0.3% (from +0.2%) and +3.7% (from +3.6%).
In the event of further softness in data this week, this could swing the pendulum more in favour of a bulky 50 basis point rate cut. This may also further weigh on US Treasury yields and the USD. However, the issue with US equity markets is that bad news may not necessarily be good news based on recession fears, meaning a soft number could send stocks lower.