TechFlow news, September 1 — According to Jinshi Data citing The Wall Street Journal's survey of top economists, nonfarm payrolls are expected to have increased by only 75,000 last month, while the unemployment rate may have risen from 4.2% to 4.3%, reaching its highest level in nearly four years.
Bill Adams, chief economist at Comerica Bank, said that for financial markets, the best-case scenario would be an upcoming jobs report showing modest job growth alongside a slight rise in unemployment. This would indicate the economy is not sliding into recession, yet also show sufficient softness in the labor market to justify Federal Reserve rate cuts.
On the other hand, the worst-case scenario would be a jobs report showing declining employment, falling labor force participation, and a drop in unemployment. This would suggest shrinking labor supply alongside weakening labor demand—a situation potentially beyond the Fed's ability to address.
With the Fed likely to cut rates in September, investors will once again grapple with determining when "bad news is good news" and when "bad news is just bad news." In other words, when will weak economic data create room for further Fed easing (beneficial for equities), and when will it trigger growth fears (harmful for equities)? The answer may hinge on why the Fed is cutting rates and what follows after those cuts.
