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cailianshe news, september 6 (editor: xiaoxiang)for investors in the global market, perhaps no "non-agricultural night" in the past few years has received as much attention as tonight...

on the one hand, as federal reserve officials shift the focus of monetary policy from curbing inflation to preventing a decline in employment,the impact of non-agricultural data on the financial market has gradually surpassed the cpi, which has received more attention during the epidemic.on the other hand,people just experienced an epic "black monday" last month, which was triggered by poor non-farm data., many people are still shocked to this day.

at the same time, judging from the timing, tonight's non-farm data is almost destined to play an extraordinarily critical role in determining the extent of the federal reserve's interest rate cut later this month.even nick timiraos, a reporter from the federal reserve known as the "new federal reserve news agency," emphasized the importance of tonight's data in an article titled "august employment report will determine the extent of the fed's september rate cut" in the morning beijing time.

timiraos mentioned that a solid employment report could prompt officials to start a rate cut cycle of 25 basis points. weak hiring or a spike in unemployment (as happened in july) could lead to a larger rate cut. in addition, friday is the last day that fed officials can communicate publicly before the self-imposed pre-meeting quiet period begins.president of the federal reserve bank of new yorkwilliamsfed governor john williams and fed governor christopher waller will speak on friday after the release of the nonfarm payrolls report, which will be the last opportunity for fed officials to convey their expectations to the market before the upcoming september meeting.

so, on this big day that can be regarded as the "decisive battle" in the stock, bond and foreign exchange markets tonight, what kind of answer will the us august non-farm data give to the market? will the data performance be as "explosive" as last month? how will the market of major asset classes develop tonight?

below, let us take stock of it before tonight:

non-farm forecast: what is the median market forecast for tonight?

according to the median forecast of economists compiled by the industry, the number of non-farm payrolls in the united states in august, which will be released at 20:30 beijing time tonight, is expected to increase by 165,000, significantly higher than the previous value of 114,000, and the unemployment rate is expected to drop slightly from 4.3% in the previous month to 4.2%. in terms of salary data, the average hourly wage in july is expected to increase by 3.7% year-on-year, higher than the previous value of 3.6%, and is expected to increase by 0.3% month-on-month, compared with the previous value of 0.2%.

as the current downward trend of us inflation is relatively stable, the importance of hourly wage indicators in non-farm data will no longer be as prominent as in the past few years. in fact, the two core points of this non-farm night are only the main indicators of non-farm employment and unemployment rate.

currently, among investment banks, the lowest forecast for the non-agricultural main indicator is 100,000 (made by landesbank bw), and the highest forecast is 208,000 (from regions bank).

it is worth noting that two major wall street investment banksgoldman sachsandjpmorgan chaseboth have released payrolls forecasts that are below consensus expectations (155,000 and 150,000, respectively).as for whether to trust these two investment banks, investors may decide for themselves (according to zerohedge, both banks have a poor record in predicting non-farm payrolls over the past year).

from a seasonal perspective, there is a relatively bad phenomenon in the past august non-farm data. adam button, an analyst at the financial website forexlive, pointed out that in the august reports of the past 23 years, the august non-farm data before revision (that is, the preliminary data released on the night of the non-farm) was lower than expected in 17 years. since then, the august non-farm data has often been revised upward in multiple rounds of revisions. according to statistics, the initial weakness of the non-farm data in august is often reflected in many of the same industries - information, professional services, manufacturing and retail. economists warned that the situation in these industries on friday is worth paying attention to.

in terms of unemployment rate, this time the industry expects the us unemployment rate to fall back to 4.2% in august.

previously, the u.s. unemployment rate in july unexpectedly rose to 4.3%, triggering the "sam rule" that predicts economic data.

andinvestors should be reminded that even if the unemployment rate in august really falls to 4.2% as expected, it will still be above the warning line that triggers the "sam rule". the difference of the "sam rule" will even rise further to 0.56%., which is mainly affected by the increase in the comparison base. the "sam rule" means that once the three-month moving average of the unemployment rate exceeds the lowest three-month moving average in the past 12 months by 0.5 percentage points or more, it indicates that the us economic recession may begin.

in previous non-farm “super weeks”, the us government and private organizations released far more labor market indicators than just the non-farm payrolls. therefore, observing some of the first us employment indicators released that week can often predict the specific performance of the non-farm payrolls in advance. however, this week, the performance of a series of us employment leading indicators does not seem optimistic.

the latest bad news came on thursday.employment data processing company adp released"small non-agricultural" adp datait showed that private sector employment grew by only 99,000 in august, the smallest increase since january 2021.

adp chief economist nela richardson said that after two years of substantial growth, the downward trend in the u.s. job market has left the pace of hiring below normal levels. the next indicator to watch is wage growth, which is stabilizing after a sharp slowdown following the epidemic.

adam button, an analyst at the financial website forexlive, also said that there is growing evidence that the us job market is cooling. unwilling to completely lay off employees, companies are scaling back recruitment to cope with high costs and high interest rates. the latest private employment data further proves the slowdown in labor demand, which helps to further curb price pressures.

in addition to the small non-farm payrolls, the latest layoffs are also worrying.the number of layoffs by challenger companies in the united states in august released on thursday reached 75,891, far higher than 25,885 in july, a month-on-month increase of 193%, the highest figure since august 2009, when the economy was still recovering from the worst impact of the global financial crisis.

“the surge in layoffs in august reflects growing economic uncertainty as companies face pressures ranging from rising operating costs to concerns about a potential economic slowdown,” said andrew challenger, senior vice president of challenger enterprises. “the current layoff trends are very similar to last year as ongoing pressures challenge companies’ workforce decisions.”

on wednesday of this week, the u.s. job vacancy data for july, which the federal reserve paid special attention to, also fell to the lowest level since the beginning of 2021.this is consistent with other signs of slowing labor demand.

perhaps one of the few good news for the u.s. labor market this week came from initial claims.data released on thursday showed that the number of initial unemployment claims last week was 227,000, basically in line with the expected 230,000. the unadjusted initial claims even fell to 189,000, reaching the lowest point in nearly 10 months. the continuing claims data also fell to a low point in nearly 3 months.

perhaps it is the impact of most of the above-mentioned leading indicators of us employment that led to goldman sachs's forecast for tonight's non-farm payrolls being lower than the market consensus. the median of the non-farm payrolls tracked by goldman sachs is only 133,000 new jobs, although its own forecast (155,000) is slightly higher than this number.

how will the financial markets spend the non-farm night tonight?

we have already discussed with investors in our early morning report how the global stock, bond and foreign exchange markets are currently reacting to tonight's non-farm data., i will not expand on this here.

in summary, the impact of tonight’s data on the market is relatively clear, which is roughly “good data equals good news, bad data equals bad news” - this logic applies to u.s. stocks, u.s. treasury yields and the u.s. dollar.

as for the impact on the fed's decision, as the new fed news agency said, if there is no sign that the employment weakness revealed in july continues into august, fed officials may oppose a 50 basis point rate cut this month. if the august employment report released this friday shows that the unemployment rate rises again and the slowdown in employment growth accelerates, several officials who were open to a rate cut at the fed's most recent meeting in late july may support a 50 basis point rate cut in september, and their opinions will also gain broader support.

in terms of specific market conditions, jpmorgan chase listed five possible market conditions based on the performance of different non-agricultural data tonight in its latest report:

① non-agricultural employment is higher than 300,000 (probability 5%):this is a low-probability tail risk scenario. the last time people saw the non-farm payrolls exceed expectations by more than 150,000 was on february 2, when the s&p 500 and nasdaq 100 rose 1.1% and 1.7%, respectively. in this scenario, we may see the market quickly rule out the possibility of a 50 basis point rate cut in september as u.s. treasury yields soar. in this case, hourly wages will be key to assessing whether the surprise in the labor market coincides with the re-emergence of wage inflation. the renewed rise in bond yields may serve as a headwind to stock market gains, but improved economic growth will ultimately be good for risky assets. overall,the s&p 500 would rise 0.25%-0.50% in this scenario.

② non-agricultural growth is between 200,000 and 300,000 (probability 25%):given that the current highest expectation in the market is 208,000, if the non-farm payrolls are in this range, it will be higher than most market expectations, which will rebuild confidence in growth from the august data. recent gdp, spending and inflation data may be reassuring to see that the high real gdp growth experienced last year is still continuing. however, the warming of the average hourly wage data may reignite concerns about wage inflation. in addition, if the data is at the top of the range, it may bring the expectation of a rate cut in september to 25 basis points and bring the expected rate cut within the year back to 75 basis points (the market currently expects 110 basis points). overall,the s&p 500 would rise 1.00%-1.50% in this scenario.

③ non-agricultural growth is between 150,000 and 200,000 (probability 40%).this situation is basically consistent with market expectations. jpmorgan's own forecast is to add 150,000 jobs and the unemployment rate to remain at 4.3%. given the strong trend in labor supply and weak labor demand, this situation will be more in line with the fed's expectations of a 50 basis point rate cut at the september meeting. even if the data ends up falling at the upper end of this forecast range, jpmorgan chase believes that the fed will cut interest rates by 50 basis points in september given weak labor demand and core inflation that appears to be under control. overall,the s&p 500 would rise 0.75%-1.25% in this scenario.

④ non-agricultural growth is between 50,000 and 150,000 (probability 25%):the immediate market reaction is expected to be negative as the market quickly adjusted to the higher risk of recession. given the risk positioning on tuesday, the market's reaction to the non-farm event may be more muted than usual. the market will quickly form an expectation around a 50 basis point rate cut, and the biggest downside risk is that the market buys into the recession/growth scare narrative. overall,the s&p 500 would fall 0.50%-1.00% in this scenario.

⑤ non-agricultural growth is less than 50,000 (probability 5%).this is another tail risk scenario, as the nfp has not been below 100,000 since december 2020. this would immediately trigger a new round of concerns about economic growth, and we would likely start to fully expect a 50 basis point rate cut in september, with the possibility of introducing a 75 basis point rate cut. in this scenario, as in past rate cut cycles, the market may believe that the united states is already in recession, so it is not cost-effective to buy the first rate cut. overall,the s&p 500 would fall 1.25%-2.00% in this scenario.

similar to jpmorgan chase, goldman sachs' equity trading department also made different scenarios for the impact of non-agricultural data. the bank's forecast is as follows:

non-farm payrolls > 250,000: s&p 500 index rose 0.5%-1%;

non-farm payrolls 200,000-250,000: s&p 500 index rises by at least 1%;

non-farm payrolls 150,000-200,000: s&p 500 index rose 0.25%-0.5%;

non-farm payrolls 100,000-150,000: s&p 500 index falls 0-0.5%;

non-farm payrolls <100,000: s&p 500 falls at least 1%.

goldman sachs treasury trading also reminded investors to pay attention to the unemployment rate, and believed that this would have the following impact on the fed's interest rate cut in september:

unemployment rate at 4.19% or lower = 25bps rate cut in september as long as employment numbers are positive;

unemployment rate 4.20-4.29% = if employment is above 150,000, a 25 basis point rate cut in september; if employment is below 150,000, a 50 basis point rate cut;

unemployment at 4.30% or higher = 50bps rate cut in september.