NFP Preview: What Are Markets Expecting?

Investors are awaiting the US jobs data for August, scheduled to be released today at 4:30 PM (GMT+4), which will be issued by the US Department of Labor. This data will be of particular importance as the US Federal Reserve relies on it to determine its course of future monetary policy. Expectations indicate that the US economy added 169,000 jobs compared to the previous reading of 187,000 added last July. Expectations also indicate that average monthly wages will decline to 0.3% compared to last month’s reading of 0.4%, and that the unemployment rate will stabilize at 3.5%. If the predictions are correct, this means:


  • The pace of employment stands at its weakest point since January 2021.


  • It will be the third consecutive decline in job data and the first decline in average wages in three months.


  • There is a clear slowdown in the labor market, especially after the decline in job opportunities available in the United States during August to its lowest level since March 2021, and the decline in job data issued by ADP to its lowest level in 5 months.


  • The labor market is starting to suffer as a result of tighter monetary policy, and this increases the chances of the Federal Reserve fixing interest rates at its next meeting on September 20th.



As for the expected scenarios:



A better-than-expected reading and higher than the previous reading


This means that the labor market is active and could encourage the Fed to continue with a tighter pace with regard to interest rates, especially after inflation rose during the month of July for the first time in 12 months. This may result in a positive reading for the US dollar and a negative one for gold and stock prices, according to analysts.



A lower-than-expected reading


 This confirms the damage to the labor market as a result of the tight monetary policy, and therefore the Fed may move to ease the tight monetary policy. According to analyst, this may negatively affect the US dollar while acting as a positive force for gold and stock prices.



The expected reading comes out close to the previous


 If the reading is higher than expected and lower than the previous reading, this also indicates a slowdown with further damage to the labor market, which may negatively affect the US dollar, as analysts suggest.


Therefore, when reading today’s job data expectations, investors should balance the opportunity of a continued tighter pace of raising interest rates and calming this pace, given that the Fed also relies on inflation and unemployment data in reading the economic scene before taking any interest rate decisions.



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