As the financial community eagerly awaits the publication of the U.S. September jobs report scheduled for this Friday, investors, economists, market participants, and activist individuals have all studied well what this piece of information portends. It will be a crucial indicator as .... as much as creation or existence of jobs in the inquisition of this report as an extension, the economy in general. Because the employment rate has become one out of the Federal reserve objectives which had originally included – austerity, then these type of job data will revolve significantly on how the interest rates shall go down in ... then how the khaki will be the financial market orientation. Quantitative aims on job reports have been more aims for this task. In this particular task, we shall explain why the past job reports have not helped in providing new knowledge so far and what the future developments in the economy are that demand the relevant job report to be written on. This task will directly relate to the past job reports, their undue criticism towards the time period of when these reports will be conducted considering the current economic situation and even raising fears on how the markets are expected to be in the future. A review of employment will then examine factors that are expected to impact on the November employment expectations which have been structured in the September employment report.
Most economists hold the perspective however that in general one hour of time will be spent creating approximately 120,000 net new jobs in non-farm payrolls.
As employment opportunities increase or at least remain unchanged, with the exception of recession years, an analysis drawbacks folows:Public Sector Employment: One of the sectors that displayed strength in payrolls over the summer, particularly state and local government hiring, is now expected to impact this overall report negatively as the rate of increase of hiring is set to reduce. This sector has had to function under strict salary limits after revenue targets were not met which is why employment levels in the public sector decreased this year. Healthcare and Social Assistance: While this sector is expected to generate new job opportunities within the envisaged period, the recruitment drive is likely to decline in comparison to previous months due to factors such as lack of workforce and ineffective management of businesses especially that of aged and child care services. Leisure and Hospitality: Work has revealed that, apart from uninterrupted job creations in leisure & hospitality work, there will also be seasonal coastal closures and related post Labour Day recesses associated with the labour market as a whole. In early September, on this sector further struck a blow to the one by hotel workers in Restaurant services. Manufacturing: Manufacturing employment remains weak and orders for long-lasting commodity furnishings have decreased.
In addition, the currently active Boeing strike cannot impact the September report at a positive level, but will be a drag on the employment numbers in October. The also mute yesterday economist’s forecast of the unemployment rate states that there wouldn’t be any changes and will remain at a low of 4.2 percent. Some however caveat that such a number may rise owing to due to the rounding of the labor force participation rate. Concerning wage growth, a further increase of 0.3% month on month is expected to be sustained in the annualized 38percent, which is low than the remapping of the inflation rate. Possible Scenarios and Market Reactions There is an anticipation that the upcoming September employment report is going to shake the financial markets a lot more than the previous reports as the vulnerability of the market to the labor market data appears to be high. Concern at the moment, is on how this report will build up the anticipated future actions of the Federal Reserve bank in terms of money management, focusing vigorously to the time, an interest rate determination, which is at most in November 2024. Unit 1: Bench Scenariy.
RPM-SWN Employment Report Scenario 1: Strong Report (Above Consensus) For the this report, if it is much better than what was expected by analysts then the question is whether nonfarm payrolls adding 150,000-200,000 jobs a month sometime in the future would be enacted so as to better present and struggling the bracing headwinds most sectors of the economy.
Reading or listening to a solid jobs report gives the assurance that there would be a brighter outlook on the economy and hence fears of drastic falls or even recessions would be abated. But a good report that beats expectations may also lead to undesirable effects in the bond market as well as in some rate-sensitive segments such as equities. After all, there is an impression that not only in the markets but also in the Board of Governors Federal Reserve System they will be thinking what are the implications of such events implementing as one of the strategies market participants cuts many times the cash rates or keeps the lending rates flat for some time seeking not to ignite an inflationary pressure which may follow. The latter classifies it as a forward market and often assumes that any price changes would result from the anticipated changes in the future interest rate as depicted by the bond market even to raise the expected yields to the detriment of bond prices. In the equity markets, this increase in rates may cause a debt cascade in leveraged sectors and especially in the real estate and technology sectors facing potential sell downs. Yet politically sensitive sectors such as financials or consumer discretionary may gain from those higher rates since it is believed that the economy is getting better.
Scenario 2: Weak Report (Below Consensus) How do you see that on at least one dimension – job creation the expectation is in ‘xxx’ range or even lower?’ Actually in the circumstances where anything below moderate to strong job creation is defined as shortfall it probably will not work as an interest making head allowance in the labour forecasts. A payroll miss would translate to panic over potential slumps that could lead to the state of affairs evolving toward depression.
According to the latest media the Federal Reserve might be forced to be more active, including implementing their next rate cut possibly even up to 50 basis points at the next mid year meeting in November 2024, as some intermediaries predict the “aggressive cuts” scenario. If that happens, a weak report could cause stocks to initially fall. But the view that there will be a shift in policy to a more accommodative stance precipitating sentiment improvement will bring about positive developments in the stock market. The real estate and technology sectors which are likely to be the most rate sensitive may most probably take advantage of the anticipated weakening of the dollar as the equity markets focus on rate cuts. In their case bond markets may also be able to observe the yields dipping (prices increasing), when the cut in rates becomes more entrenched. Increases in yields are probably being transacted in the bond market as there is a historical pattern of money shifting to bonds on low interest rate periods. Scenario 3: Projections in Consensus If this report should come out more or less to expectation with addition of some 120,000 jobs and people should not forget the initial reaction from Financial markets would be none or most probably very weak.
An inline report would validate what has already been established within the market in terms of the “soft landing” timeline which is attainable at a slow economic growth without going into a recession.
In such regard, we can assume status quo in term of gradual policy moves toward easing this time in the current status quo, with 25bp even now being the upper most scenario for outturn in subsequent meetings being the top most rated policy in the next meeting. In this case, shares could be able to retain increased even though on a wider basis only in the more defensive consumer staples and utilities sectors such as. Also, it is likely that the bond indices would be balanced but the US dollar would be intimidated since its strengthening factor was fresh borrowings, because the market would be tentative on whether to bet on any future lower interest rate. Breaking Previous Jobs Reports and The Reaction of The Market August 2024: Giving attention to the August report on the labor market trends that the only created 142 each season to several 130 jobs as in July month, the job outplacement did shift downs as much. However, it was worrisome since the rate of unemployment was still high at 4.3% which is far too high. Combined with the 0.4% gain in average hourly earnings, which further weighed on inflation fears, the financial markets responded with a surge in bond yields as anxious investors priced in a lengthening of the timeline for FOMC interest rate cuts. Among investors, the mood remained favorable on an expectant view cutting the Federal Bank rate of 25bps to be the last gasp.
On the contrary, the July report was a letdown since there was a growth in jobs of only 130,000 and an increase in the unemployment rate of 4.3% prompting the Fed to go on the dovish side.
The sluggish job data led to the revision of forecasts requesting a more than aggressive cut in interest rates, this in turn, saw a rise in the prices of bonds that resulted in a boom in stocks. Following the report, notable sectors such as technology and utilities had a positive outcome as the rate expectations were lower which was favorable to them. Key Aspects That Should Be Considered By Investors Dwell On Wage Growth And Labour Force Incorporation Although job growth is by far the most glamorous number predicted in advance, investors have to be very careful with the wage growth structure and the labour force participation rate. This explains why wage growth is also a problem of inflation; for instance, in a monetary policy concerning the Phillips curve where more and more wage growth leading to high demand. There is also the participation rate which is quite important too. A falling or flat participation rate might hide a lack of structural resilience in the economy even if the amount of available work is seemingly healthy. If the participation rate increases then it would imply that more people are becoming active and taking part in active business and employment activities which means that economic growth can be achieved without demand-pull inflation due to push from salaries.
The performance of the Fed and interest rate cuts In regard to the next steps of action by the Federal Reserve, it is expected that the September 2024 jobs report will sharpen the residual view on what comes next.
It is clear that the hawkish Fed issued an alert about a probable cessation in the rate increase cycle. However, employment surprises may alter this stance once more. Let us say there is too much strength in the labor market, that will entail that the Federal Reserve will hold the rates for much longer so that the risk of inflation coming back may not be realized. On the other hand, a bad situation could compel the Fed to become even more dovish on rates. As a result, financial markets became increasingly sensitive to the data behind the employment report, and have thus become more prone to volatility after its release. The most potential swings will be in technology, financial services and consumer discretionary stock markets. Yields on bonds will be quick to respond as well if such a report changes a more hawkish view of the future Federal Reserve’s economic policy plans. In conclusion, at the time of writing, the September 2024 jobs report becomes the epicenter of activity in the financial markets, with regard to the subsequent steps in both monetary policy and the direction of interest rates set by the Federal Reserve.
While some figures such as the employment expansion may exceed expectations, others are likely to disappoint. In the process of absorbing the labor market data, players in the market will have to endure this rather high turbulence. Markets are waiting for more insight into wage growth, labor force participation, and any other economic factors that would provide impetus to both stock and bond markets. Even so, the jobs report will be significant for the Fed’s decision making as to the assessment of the current situation in the US, and how much further tightening or loosening may be possible.
