Payrolls on Deck

August 29, 2023 • Estimated Reading Time: 4 minutes

Macro Markets

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During Jackson Hole, Fed Chair Powell said that the central bank is willing to raise rates further if required to combat inflation putting an end to the “stop hiking rates” narrative that was being built. This means all data points will be back on the table, and every meeting is a live hike potential meeting. Two huge data reports are coming up with Labor/employment and PCE.

The Fed's preferred inflation indicator, the Personal Consumption Expenditures (PCE) index, is scheduled for Thursday morning, while the August jobs report is expected Friday at 8:30 a.m. ET.

Data on Thursday is expected to show "core" PCE — which strips out food and energy costs — rose 4.2% over the prior year in July, up from 4.1% in June. The Fed targets 2% inflation, on average. Over the prior month, "core" PCE is expected to rise 0.2% in July.

Meanwhile, Friday will look at what some economists say could drive the upside risk to keeping inflation higher: the labor market. Economists expect the US economy added 168,000 jobs last month, with the unemployment rate flat at 3.7%. The numbers would be a continuation of the moderate slowdown underway in the labor market.

For a proper cool-down of the market, you would want to see consistent under 200k job prints. Anything that shocks to either side could be worrisome for the market.

While the NFP increase is expected to stay below the 200k mark, we believe the August print could exceed consensus expectations. The stability in the unemployment rate and positive outlook for wage growth further indicate that the labor market remains robust. These factors could be critical in shaping monetary policy and market sentiment in the coming months. The market is currently pricing around a 47% hike for the November meeting. We could see this move higher.

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