The next big jobs report, the Employment Situation from the Bureau of Labor Statistics for August will hit the wires before the stock market opens on Friday, September 6.
Has the 100% certainty among investors and traders that the Federal Reserve will cut interest rates at its September 18 meeting drained all of the drama out of the August jobs report?
Right now economists expect the unemployment rate in August to be 4.3%. That would be identical to the 4.3% rate in July. And it would be the highest rate sinnce October 2021.
The unemployment rate has risen from 3.5% in July 2023 to 4.3% in July 2024. In the second quarter of 2024, the unemployment rate was 4.0%, up from 3.8% in the first quarter.
All this is reflected in the August 30 odds of an interest rate cut at the Fed’s September meeting. The CME FedWatch tool put the odds of a 25 basis point cut at 69% and the odds of a 50 basis point cut at 39%. In other words everybody is expecting a first rate cut from the Fed on September 18.
It would take a huge surprise–a complete reversal in the softening trend in the labor market–to shift the odds for September.
The place to look for a reaction to Friday’s report would be in expectations for the Fed’s December 18 meeting where sentiment has been slowing shifting toward a belief that the Fed will cut rates by 50 basis points at that meeting. According to the fEDWatch tool there are 49.1% odds of a total 100 basis points in interest rate cuts from the Fed at the remaining three meetings of 2024. And 21.5% odds of a total 125 basis points in cuts.
The action after Friday’s report will be in those two categories as the markets decide to hold to current belief of 100 basis points in cuts or more–or to start to move to a more likely, in my opinion, 75 basis points in cuts for 2024.
