Today at 4:30 pm Dubai time, the markets will be expecting the release of September’s US jobs data issued by the US Department of Labor. These reports will be of particular importance as the Fed relies on them to determine its future course of monetary policy. Expectations indicate that the US economy added 171,000 jobs compared to 187,000 added last month. Expectations also indicate that the unemployment rate will decline to 3.7% compared to the previous reading of 3.8%, with the monthly wage rate rising to 0.3% compared to the previous reading of 0.2%.
If the reports come out as expected, this would indicate the following:
- The pace of hiring is at its weakest since January 2021.
- There is a slowdown in the labor market, especially after the decline in job data in the private non-agricultural sector to its lowest level since January 2021.
- The labor market has started deteriorating as a result of the Fed’s monetary policy, increasing the likelihood that the Fed will stabilize interest rates at its next meeting in November.
The expected scenarios for today’s data release and market reactions are as follows.
- A better reading than expected and higher than the previous reading
This reading would indicate that the labor market is active and encourages the Fed to continue with a tight pace of interest rate hikes, especially after inflation rose in August for the second consecutive month. Therefore, this may be positive for the US Dollar, but weigh negatively on gold and stock prices, according to analysts.
- A reading lower than expected
This outcome would confirm a deteriorating labor market as a result of the Fed’s tight monetary policy. Therefore, the Fed may move to ease its policy, and could potentially negatively affect the US Dollar, while benefiting gold and stock prices, according to analysts.
- Higher than expected and lower than the previous
If the reading is higher than expected and lower than the previous reading, this also indicates a slowdown in the labor market, which may negatively affect the US dollar.
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