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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Executive Summary
- Nonfarm payrolls growth was far weaker than expected in July along with a two-month downward revision.
- The BLS saw “no discernible effect” from Hurricane Beryl on national employment and unemployment data.
- That looks true for payrolls figures from the establishment survey but average hours worked dipped in a potential sign of disruption. Further, the household survey reported a sharp spike in those not at work due to bad weather along with the bulk of the rise in unemployment being from temporary layoffs.
- Another important caveat is that response rates moved lower again, increasing potential for large revisions.
- Those notable caveats aside, the unemployment rate surprised higher again, and at 4.25% is now 0.25pps above where the median FOMC participant expected for 4Q24 and just above the 4.2% long-run estimate.
- With signs that some labor market slack could be emerging, building on already dovish implications from employment cost and productivity data, the market reaction has been hugely dovish.
- A stronger than expected ISM services pushed back on the recession hypothesis to help move away from dovish extremes, but inter-meeting cuts are still probed (4bp for the August contract) and there is more than 50bp of cuts priced for the next meeting on Sept 18.
- A majority of analysts reviewed below kept to a 25bp cut for September albeit some heavily leaning on the August NFP report as a potential risk of a 50bp cut in September, but Citi, JPM, NWM and UBS all explicitly call for 50bp cuts.
- We expect Fedspeak to push back on near-term cut expectations, and especially any emergency cuts, but the data should be in the driving seat with the August round of CPI and payrolls reports still to come.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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