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as powell publicly stated that he "does not seek or welcome further cooling of the labor market", the market's attention to us employment data has increased sharply.

text｜ jin yan from washington

editor: su qi

financial markets have been very emotional of late, with concerns about a potential recession on one side and excitement about the first interest rate cut in years on the other.

on september 6, local time, the u.s. bureau of labor statistics released a report showing that the seasonally adjusted non-farm payrolls in the united states increased by 142,000 in august, compared with an expected increase of 160,000 and a previous increase of 114,000. the u.s. unemployment rate in august was 4.2%, compared with an expected increase of 4.2% and a previous value of 4.3%. after the release of the non-farm payrolls data, traders first expected a 50% chance of a 50 basis point rate cut by the federal reserve this month, then the probability of a 50 basis point rate cut was halved to 27%, and the probability of a 25 basis point rate cut rose to 73%.it is worth noting that the july data was revised down from 114,000 to 89,000, and the june data was revised down from 179,000 to 118,000. in total, 86,000 new jobs were revised down in the two months.

brian coulton, chief economist at rating agency fitch ratings, told caixin that the employment report figures did not actually change the existing narrative much. employment is slowing down, but it is a gradual process, not a sudden turn. the rebound in the household employment index is somewhat comforting, after the index had begun to deviate. wage growth rose slightly from 3.6% to 3.8%, but not enough to prevent the federal reserve from announcing a rate cut later this month.

the latest data shows that the employment participation rate of the prime-age workers aged 25 to 54 in the united states has fallen for the first time since march; the average increase in private sector employment in the past three months was 96,000, the first time it has fallen below 100,000 since the outbreak of the covid-19 pandemic. photo by jin yan

even though there hasn’t been some catastrophic collapse of the labor market, hourly wages haven’t fallen.hiring has slowed down significantly, but there is no tendency for a large number of employees to be laid off. one thing people pay attention to is whether hours are being cut from the employer's perspective, and this does not seem to be the case. the latest non-farm data does not look like a recession is imminent, and from the perspective of the fed's dual mandate, it can even be asserted that the us economy is still close to full employment.

however, after the release of the us august non-farm payrolls report, us stocks first opened higher due to increased expectations of interest rate cuts, and then immediately fell.on the 6th, the us stock market staged a big dive. as of the close, the nasdaq fell 2.55%, the s&p 500 fell 1.73%, and the dow fell 1.01%. among them, the "big seven" us technology stocks all plunged, us chip stocks plummeted, and the philadelphia semiconductor index fell 4.52%. the russell 2000 small-cap stock index, which is highly sensitive to economic cycles, fell 2%, and the "fear index" vix rose more than 17%.

u.s. stock indexes fell sharply in the first week of september. currently, the major u.s. stock indexes are at about four-week lows since early to mid-august. the s&p large-cap and russell small-cap stock indexes fell for four consecutive trading days in the first week of september, that is, u.s. stocks fell every day in the first trading week of september. this week's turmoil began when traders returned from the labor day holiday and data showed that the manufacturing industry continued to be sluggish. on september 3, stock and bond yields fell sharply, repeating the sharp decline in the volatile market in early august.

the tech-heavy nasdaq composite fell 5.8% this week, its worst weekly performance since january 2022. nvidia fell 14%, losing a staggering $406 billion in market value. this was the biggest weekly loss of market value for a single company in history, according to dow jones market data. the s&p 500 fell 4.2% and the dow fell 2.9%. on september 6, all three major indexes extended their losses. prior to this, not only did the stock market return to near its highs, but small-cap stocks and the equal-weighted s&p 500 performed particularly well.many wall street analysts pointed out to caixin that the logic behind the stock market's rise is obviously the positive impact of interest rate cuts.

the non-farm report on the 6th showed that the main growth in non-farm employment in august came from the construction industry (+34,000) and health care (+31,000), and the number of manufacturing jobs fell by 24,000, mainly reflecting a reduction of 25,000 jobs in the durable consumer goods industry. other major industries did not change much. the average hourly wage for all employees in the private non-farm sector increased by 14 cents to $35.21, a year-on-year growth rate of 3.8%. the average work week for employees in the private non-farm sector rose by 0.1 hours in august to 34.3 hours.

if we simply emphasize the negative information of the non-farm report, it includes that although the 142,000 new jobs in august were consistent with the average job growth rate in recent months, it was a significant slowdown compared with the average increase of more than 200,000 in the past 12 months, and the previous values ​​for june and july were revised down by a total of 86,000. this not only created a tense atmosphere that the labor market lost momentum earlier than expected, but also caused the average of new jobs in the past three months to fall to the lowest level since mid-2020.

jeffrey young, former global head of foreign exchange at citigroup and co-founder and ceo of deepmacro, told caixin that the lack of layoffs suggests the federal reserve does not have to cut interest rates very aggressively at the moment to prevent unemployment from rising.in fact, the weakness in the job market seems to be more the result of employers reducing new hiring than new layoffs. to some extent, companies are stockpiling labor, perhaps with fresh memories of the difficulty in hiring workers during 2020-2021 and the high prices they had to pay for them.

markets are becoming very emotional, with stocks and bonds being much more sensitive to economic indicators than in the past.fed officials have signaled in recent weeks that they will almost certainly cut rates at their mid-september meeting. the fed delayed its rate cuts after inflation unexpectedly failed to fall at the beginning of the year, and officials were satisfied that inflation has slowed since then. since the 1990s, the fed has experienced six relatively obvious rate cut cycles. among them, two were purely preventive rate cuts, three were purely relief rate cuts, and the remaining one was a mixed rate cut consisting of "preventive rate cut + relief rate cut".

now, with powell publicly saying that he "does not seek or welcome a further cooling of the labor market," the market's attention to u.s. employment data has risen sharply. market speculation is focused on whether the rate cut in september will be 25 basis points or 50 basis points, but there is nothing in the latest non-farm report that is enough to push the fed in any direction and provide support to the stock market. from an investor's perspective, any move by the fed will surprise half of the market.

traders are wavering on the size of the september rate cut and wall street is also debating fiercely, which may leave the stock market lacking direction. photo by jin yan

the market is so sensitive and emotional because, on the one hand, interest rates remain at a 20-year high, which makes many people nervous because the u.s. labor market may have slowed down too much; on the other hand, when inflation is no longer the focus, economic growth becomes the key to people's emotions. wall street needs a report to confirm the "soft landing" of the u.s. economy. any small changes in economic data will be magnified into concerns about recession, or a sharp rebound in the stock market after the concerns are temporarily relieved. at the same time, driven by the expectation that the federal reserve will cut interest rates soon, previously unpopular stocks have defeated the once-popular stock market stars.

scott wren of wells fargo investment institute believes that financial markets have turned their attention to how much the federal reserve will ease policy and how fast the economy will slow, and short-term volatility is expected to continue.