How will the market interpret the non-farm payrolls data tonight? Where are the opportunities and risks?
The non-farm payrolls data on October 4 is crucial to the Federal Reserve, especially the first employment report after the rate cut. Powell has repeatedly emphasized that the Federal Reserve is closely watching the labor market, and the 50 basis point rate cut in September was based on employment data. He once said that if he had known the employment situation in July, he might have cut interest rates in advance.
In short, employment data has a very high status in the eyes of the Federal Reserve. For investors, rising unemployment may indicate a recession in the United States. The Federal Reserve has a firm attitude towards unemployment, setting the median unemployment rate for 2024-2025 at 4.4%, and is unwilling to see it rise.
There are many macro data, and if you only look at one, the unemployment rate is the most critical. The higher the unemployment rate, the greater the risk of recession. Tonight's data interpretation:
Unemployment rate: previous value 4.2%, expected 4.2%. Maintaining or declining is good news, and if it does not rise, the recession expectation is not established.
Number of employed people: the more the better, the market expects a slight decline, but it is not a big problem, and attention should also be paid to the labor participation rate.
Wages: The Fed once viewed wages as a driver of inflation, but now sees them as a support for the economy.
In short, a non-rising unemployment rate is not a negative; if it rises, even a slight increase of 0.1% may cause market panic. Some people expect rising unemployment to force the Fed to cut interest rates by 50 basis points in November, but this may be interpreted as an expectation of recession, which may not be a good thing. Other key data include employment and wage levels.
