Investors expect job creation in the United States to slow down again in September, in a key announcement for the Federal Reserve since markets began to fear that American interest rates will remain high for longer, given of persistently high inflation in the local economy.
Labor market data will be released tomorrow at 8:30 EST in the formal U.S. jobs report known as Payroll. The expectation points to the net creation of 170 thousand jobs in September, compared to 187 thousand vacancies opened in August. Projections, collected by Refinitiv, range from the generation of 90 thousand to 256 thousand jobs in the period.
Bank of America economists are betting on the opening of 185,000 jobs in the period, above the Refinitiv consensus. BofA justifies the thesis by the continuous weekly unemployment insurance claims data pointing to few layoffs, and a continued high demand for labor in the US.
If this is confirmed and Payroll exceeds consensus, the data would indicate that the local economy remains resilient, despite the aggressive monetary tightening campaign led by the Federal Reserve since 2022. Last month, the president of the American central bank, Jerome Powell, had already pointed out that the authorities are “prepared” to raise interest rates again if necessary.
Numbers above consensus tomorrow could boost US Treasury bond yields, which have been testing highs since 2007 in recent sessions, and trigger broad realization in equity markets, putting the desired “soft landing” of the US economy at risk. Investors may also adjust bets for a further interest rate hike this quarter based on stronger data.
In the early afternoon of this Thursday, investors were mostly projecting that interest rates would be maintained in the November decision of the Federal Open Market Committee (FOMC). Derivatives traded on the Chicago Mercantile Exchange (CME) pointed to a 78.4% chance of unchanged interest rates in the range between 5.25% and 5.50%, while bets on a 25 basis point increase were at 21.6% .
On the contrary, a set of economic indicators below consensus could cool the upward trajectory in Treasury yields and endorse the reading that the Fed is managing to align a soft landing scenario for the American economy. September employment data from ADP, considered a preview of Payroll and released yesterday, indicated that the American private sector created 89 thousand jobs last month, below the consensus of 153 thousand.
In addition to job creation, Fed officials will continue to pay close attention to hourly wage gains and the unemployment rate. The Refinitiv consensus points out that payroll costs should continue to increase year-on-year, at 4.3%. On a monthly basis, salaries should accelerate their rate of increase to 0.3%. The unemployment rate is expected to fall to 3.7%, while the number of hours worked per week is expected to remain at 34.4.