The non-farm data on October 4 was the first employment data after the Fed’s interest rate cut. In both of Powell’s public speeches, he talked about the Fed’s attention to the labor market, including the direct 50 basis point interest rate cut in September, which was caused by the employment data. At that time, Powell said that if the employment data had been seen in July, the interest rate might have been cut in July.

So to put it bluntly, employment data has a very high status in the mind of the Federal Reserve. For investors, a rise in the unemployment rate may very likely represent a recession in the US economy. The Federal Reserve's view on the unemployment rate is very decisive. The September meeting made it clear that the median unemployment rate in 2024 and 2025 will be 4.4%, which means that the Federal Reserve does not want the unemployment rate to continue to rise.

I have told my friends before that macro data is too complicated and there are too many things to look at. If you only look at one, then look at the unemployment rate. The higher the unemployment rate, the greater the risk of a US economic recession. So tomorrow's data is easy to understand. The first priority is the unemployment rate. The current value is 4.2%, and the market expectation is 4.2%. So it is a good thing if the unemployment rate remains unchanged or falls. Although it does not mean that a fall in the unemployment rate will definitely pull up the market, it is certain that as long as the unemployment rate does not rise, the recession trade will not hold.

In other words, if the unemployment rate does not rise, it is definitely not a bad thing. If the unemployment rate rises, even if it rises by 0.1%, it may cause panic in the market. Of course, whether the panic will be accepted by the market is another matter. Some friends think that the rise in unemployment rate is a good thing, which may force the Federal Reserve to cut interest rates by 50 basis points in November instead of 25 basis points, but this rate cut may be interpreted by the market as an expectation of recession, which may not be a good thing.

In addition to the unemployment rate, there are several key data, such as employment. The more this data, the better, but from the perspective of market expectations, it seems to have fallen a bit. The problem is not big. Employment also depends on the labor participation rate, and secondly on wages. Wages have changed again. Previously, the Federal Reserve believed that wages were one of the reasons for continued inflation. Now, wages have become a reference for maintaining the economic level.

It's really difficult. So, as for the overall data, according to my personal understanding, it may not be correct. My understanding is that the lower the unemployment rate, at least for now, the safer it is. It is also relatively safer if the wage level remains unchanged. A small decline should not be a big problem. The more employed people, the better. A small decrease depends on the market's understanding. Generally speaking, the unemployment rate accounts for 70 points, employment accounts for 20 points, and wages account for 10 points. That's about it.

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