Payrolls on Deck

August 01, 2023 • Estimated Reading Time: 5 minutes

Macro Markets

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Non-Farm payrolls is up this Friday at 8:30 am EST. It will be the biggest driver of the market until CPI. Fed Chairman Powell mentioned that he will be data-dependent only on further monetary policy, "Policy has not been restrictive enough for long enough." He also noted some damage to the US economy would inevitably result from policy changes to date, noting the US economy could experience "a period of below-trend growth and some softening of labor market conditions."

The most important data points that will drive the Fed's further policy will be employment and inflation data. Non-farm Payrolls, CPI, and PCE will be some of the most important numbers the Fed will consider for their monetary policy.

This week, we get the most significant reading of the health of the US jobs market in the form of the Non-Farm Payrolls (NFP) report. Compiled by the Bureau of Labor Statistics (BLS), it surveys both government and private enterprises to determine the number of workers in the US, excluding those involved in farming, private enterprise, household business, not-for-profits, and the military.

NFP data is typically released as an increase or decrease in the number of jobs created. With each month's NFP report, investors also get readings on the official US unemployment rate and the change in Average Hourly Earnings. Together, they constitute an important window into the health of the US economy. A strong NFP report indicates a strong economy and increased spending capacity to increase economic growth and vice versa.

This week, economists expect the NFP report to show 203,000 jobs were created in the US economy in July. This is slightly down on June's 209,000 increase and well below the 12-month rolling average of 316,000 jobs per month. So, it is clear the market is expecting another indication that the US jobs market is cooling. This is a good sign as it shows inflation is also cooling down.

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