Fed Eyes August Jobs for September Rate Cut

In anticipation of the Federal Reserve's September rate decision, the August employment data has emerged as a key variable. U.S. nonfarm payrolls are scheduled to be announced on Friday, September 6th, at 8:30 a.m. local time (9:30 p.m. Seoul time). This employment data will play a crucial role in assessing the U.S. economic growth before the Federal Reserve decides on rate cuts. The recently released July job growth rate was lower than expected, and the unemployment rate reached its highest point in nearly three years. Under these circumstances, Federal Reserve Chair Jerome Powell hinted at a more detailed analysis of the labor market over inflation, strongly suggesting the possibility of a rate cut in September. This implies that further cooling of the labor market is undesirable. For the August employment report, approximately 165,000 new jobs are expected to be created. This is higher than July’s 114,000 but still one of the lowest levels since early 2021. The unemployment rate is expected to slightly decrease from 4.3% in July to 4.2% in August. Two days before Friday's report, the job openings data for July will be released. This measure of labor demand is expected to drop to 8.1 million, the lowest in three months and near the lowest levels of the past three years. The job openings report also includes data on layoffs and retirements, and a significant increase in layoffs could heighten the Federal Reserve's concerns about labor market weakness. This week will also see the release of weekly unemployment claims and the ADP Research's August private employment report. The Federal Reserve will publish the Beige Book, reporting on regional economic conditions, and the ISM will release the manufacturing and services purchasing managers' indices. These various indicators will serve as important references for the Federal Reserve's decision on interest rates in September. According to a KCMI report, the stock market, financial market, and the dollar could react differently depending on the employment data results. If the employment data is stronger than expected, the stock market may decline in the short term, bond yields could rise, causing prices to fall, and the dollar may strengthen. Conversely, if the employment data is weaker than expected, the stock market might rise in the short term, bond yields could fall, causing prices to increase, and the dollar may weaken. Additionally, due to the recent AI boom, the tech sector, particularly semiconductor stocks, are showing strength. Concerns about economic slowdown are increasing interest in defensive stocks such as utilities and healthcare. The expectation of rate cuts is also boosting interest in the bond market. Investors should be aware of potential market volatility surrounding the employment data release and pay attention to risk management.