Key US Non-Farm Payrolls Report in the Spotlight

Expectations for the August U.S. employment report point to a further weakening of employment growth. Analysts predict that the number of new nonfarm payroll jobs will increase by only 75, marking the fourth consecutive month with growth below 100. Such a weak pace has not been seen since the pandemic. The unemployment rate, however, is expected to rise to 4.3%, reaching its highest level since 2021..

The slowdown in the labor market is due to a combination of factors: economic uncertainty, high operating costs for businesses, and President Donald Trump's unstable trade policies. Additionally, the latest ADP report For the private sector, the figure showed only 54 new jobs, mainly in tourism, construction, and business services. Weakening hiring plans and rising unemployment claims only confirm the deteriorating labor market conditions.

The Fed's "dovish" policy

This situation has a direct impact on expectations regarding Federal Reserve policy. Financial markets almost unanimously assume that the Fed will cut interest rates by 16 percentage points during the September meeting (September 17-0.25).However, if the three-month average for employment growth falls below 50, a deeper rate cut would be possible. The problem remains persistent inflationary pressure, which limits the central bank's room for maneuver and forces it to balance support for the weakening labor market with the need to combat inflation.

SP500 index In anticipation of a more dovish Fed policy, the economy is currently at historic highs around 6520 points. This, in turn, means that today's reading could be crucial in maintaining the current trend on Wall Street. The political context is also important. As a result of significant revisions to data from previous months, which showed that earlier readings overstated the scale of the improvement, President Trump decided to fire the head of the Bureau of Labor Statistics. This decision raised concerns about the independence of statistical institutions and heightened uncertainty about the reliability of official data.

Source: Krzysztof Kamiński, OANDA TMS Brokers