Investing.com – Investors are looking ahead to Friday’s release of crucial data that could influence how the Federal Reserve views its next interest rate decision later this month.
Economists expect the U.S. economy to add 164,000 jobs in August, up from 114,000 in the previous month. The July figure, well below expectations, sparked a broader market decline as traders worried about the possibility of a U.S. recession.
Meanwhile, inflation is expected to fall from 4.3% to 4.2%, while a slight increase to 0.3% is expected on a monthly basis.
“Job growth is slowing, but July’s numbers exaggerated that trend. Hurricane Beryl and power outages in Texas likely slowed payrolls in July,” Morgan Stanley analysts said in a recent note to clients. “The July slowdown also outpaced jobless claims, which have been declining in recent weeks, and the jobs report contrasts with the momentum in consumer spending.”
The labor market data will likely play a role in how Fed Chairman Jerome Powell approaches the much-anticipated policy shift from fighting inflation to measures to prevent job losses. Powell said in August that the “time has come” to adjust monetary policy because there are potential “downside risks” to the U.S. labor market.
According to the FedWatch tool closely monitored by CME, analysts are more or less convinced that the Fed will cut borrowing costs by 25 basis points at the central bank’s upcoming two-day meeting on September 17 and 18. Interest rates are currently at a 23-year high of 5.25 to 5.5 percent.
“The turnaround from inflation to employment is complete,” Citi analysts said in a note to clients on Tuesday.
Citi analysts expect employment to reach 125,000, adding that this is “soft enough” to raise the benchmark interest rate by 50 basis points.
Analysts at Morgan Stanley expect employment to be at 185,000 and unemployment to be at 4.2 percent. Analysts at Nomura, meanwhile, expect the figure to be 130,000 and 4.2 percent respectively.
How do you think the non-farm numbers for August will compare to economists’ expectations? Have your say in our online poll on X.
