MNI US Payrolls Preview: Deciding 25bp or 50bp For A First Cut

Executive Summary

• Nonfarm payrolls growth is expected to see a partial bounce in August to 165k after a particularly soft 114k, with continued questions over the extent to which the latter was driven by one-off factors.
• The scope for revisions to the prior two months is high, exacerbated by low response rates, whilst Natixis point out that seven of the past ten years of July payrolls figures were revised higher.
• Expect particular sensitivity to the unemployment rate, calculated from the separate household survey (a survey effectively of ~40k households for a country with more than 330 million people).
• Consensus looks for 4.2% after the surprisingly large 0.20pp increase to 4.25% in July was mostly driven by temporary layoffs. Surprises in either direction can confirm either a 25bp or 50bp cut in September.
• Powell has dialled up sensitivity on labor-related releases by saying “We do not seek or welcome further cooling in labor market conditions” which should see 50bp cut expectations dialled up on any further deterioration, but equally an in-line report could see calls for a measured approach to cuts.
• Recent Fedspeak has lent towards the latter. Expect prominent FOMC members Williams and in particular Waller to try to guide the market reaction in post-release speeches.

PLEASE FIND THE FULL REPORT HERE: USNFPSep2024Preview.pdf

MNI (LONDON)