Financial markets took Thursday’s inflation update from the Federal Reserve’s favorite indicator largely in stride, turning their attention to Friday’s nonfarm payroll report in hopes of finding further signs of a labor-market slowdown.
Data released earlier this week demonstrates how much is riding on labor-market conditions right now. On Tuesday, stock investors cheered reports that showed job openings fell to a 28-month low of 8.8 million in July and consumer confidence dipped in August. Then Wednesday’s private-sector payrolls report from the firm ADP reflected a lower-than-expected 177,000 jobs gained in August.
“All eyes are now on tomorrow’s U.S. jobs report,” they said in a note. “Our U.S. economists are expecting nonfarm payrolls to slow down further to 150k, and yesterday we had some further evidence of a softening labor market from the ADP’s report of private payroll.” “The setup for NFP [nonfarm payrolls] unquestionably leaves the true shock an upside surprise,” Jeffery wrote in a note on Thursday. “Nonetheless, given what’s been a resilient labor market and the Fed’s consistent messaging that a single month’s data does not a trend make, even an expected slowest pace of hiring since December 2020 would not be enough to take another hike this year off the table.