FED Rate Traders Eye JOLTS Jobs, Ahead of the NFP

Employment figures are taking extra attention now, as the FED has shifted their focus from inflation to jobs and today’s JOLTS jobs are not likely to go by without any attention. Federal Reserve Chair Jerome Powell’s remarks at last week’s Symposium indicated a willingness to consider a 50 basis point rate cut, either in this month’s meeting or in the near future. This has led to a shaky start for the markets in September, with strong demand for bonds driving yields lower.

Market Sentiment Hinges on Key Employment Data

Fed funds futures now indicate a 40% chance of a 50 basis point rate cut at the September 18 meeting, making this scenario increasingly plausible. Much of the outcome will depend on Friday’s non-farm payrolls report, making today’s JOLTS job openings data crucial. Yesterday’s manufacturing PMIs showed signs of softening, with the S&P Global survey indicating the first decline in employment this year.

Lower Jobs Figures Could Drive 50 bps FED Rate Cut

According to Deutsche Bank economists, if Friday’s US August payroll report shows an unemployment rate of 4.2% to 4.3% with job gains between 130,000 and 150,000, it would likely reinforce market expectations for a 25 basis point rate cut by the Fed on September 18. However, if the unemployment rate rises further or if there are other signs of a weakening labor market rather than stabilization, the market might anticipate a more aggressive 50 basis point cut. This upcoming data will be critical in shaping market expectations and guiding the Fed’s policy decisions.

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