Tonight's non-agricultural fear will exceed expectations again! Be wary of two extreme situations "flip the table"

The US non-farm payrolls report for August is scheduled to be released at 20:30 Beijing time on Friday.The market expects the report to show a slowdown in job growth, which will ease pressure on the Federal Reserve to raise interest rates further, and a historically low unemployment rate.

Economists surveyed by The Wall Street Journal estimated that,170,000 non-farm jobs were added in AugustThe seasonally adjusted increase would be the smallest monthly increase since January 2021August's industrial action could distort those numbers, including strikes in Hollywood.

Forecasters estimate that,Average hourly earnings will increase by 4.4% in August from a year earlier, roughly the same as in July.The Federal Reserve views wage growth as a sign of inflationary pressures, particularly in labor-intensive services.Economists also expect the unemployment rate to remain at a historic low of 3.5%.

Federal Reserve Chairperson Jerome Powell hinted on August 25 that the Federal Reserve may maintain interest rates unchanged at its September policy meeting, butIf the economy does not weaken further, the possibility of interest rate hikes in the coming months remainsInflation from its peak in June 2022substantiallyFederal Reserve officials said a recovery in economic activity and higher wage growth could hold back inflation from returning to its 2 percent target.

Luke Tilley, chief economist at Wilmington Trust Investment Advisors, said:As demand for workers declines, easing the labor market without triggering mass layoffs is a desirable outcome for the economy, and that prospect looks increasingly likely.

"Our economy is slowing, which is putting pressure on job growth, but job growth is still pretty strong," he said.This will be the key to a soft landing because if we continue to maintain net job growth, consumers will not be able to slash spending significantly"A soft landing is the result of an economy cooling down enough to control inflation without falling into recession.

The demand for workers is slowing down

Job growth has recently returned to a more sustainable paceBut there are stark differences in the industries that are adding workers compared to overall growth when the economy was just recovering from the recession of the epidemic

Employers in health care, construction and social services have been hiring relatively fast this year, as have industries such as restaurants, childcare and education that have not yet fully filled in the workers lost during the epidemic. Meanwhile, factory headcount has stagnated, while employment at tech-heavy information companies has fallen this year.

Other evidence suggests that labor demand is weakeningJob openings by employers fell in July, bringing the vacancy rate to its lowest level since March 2021, although still higher than pre-epidemic levels. The share of new hires among all employees also fell to its lowest level since April 2020.

Wage growth signals are complex

In recent months,Wage growth has outpaced inflation, which has boosted purchasing power and helped maintain economic growth at a stronger level than expected at the beginning of the year。

After two years of inflation eroding living standards, this development is good for households and good for the economy, as consumer spending accounts for two-thirds of U.S. economic activity. But a rebound in inflation-adjusted wages could add to the challenges facing the Federal Reserve. Powell recently said that reducing inflation could require a period of below-trend economic growth.

Wage growth is above the pre-epidemic average and above 3.5%,Federal Reserve officials and many economists believe that 3.5% wage growth will help bring inflation back to 2%.。

Jonathan Millar, senior US analyst at Barclays, said: "Wages [growth] have indeed slowed... but the slowdown we are seeing is painfully slow."We haven't seen enough of a slowdown yet”。

Wage growth has fallen from an all-time high last year, evidence that workers' bargaining power is weakening as labor demand and supply are increasingly aligned.Other indicators also show similar signs, such as being influenced by someIndustrial foreign exchangeThe resignation rate, which economists see as a sign of wage stress, fell back to its 2019 average in July, below the all-time highs set in 2021 and 2022.

There is still a shortage of manpower.

Other indicators suggest that the labor market remains unusually tight.

The unemployment rate is approaching a 50-year lowThe share of prime working-age adults aged 25-54 in the labor force is at its highest level in more than 20 years. The labor force participation rate for this group is higher than it was before the epidemic, but the overall labor force participation rate has not recovered.

If job growth slows only because there are not enough people to hire, rather than because demand for workers decreases, then wage and price pressures are likely to remain highAnd it complicates the situation of a soft landing.

George Mateyo, chief investment officer at Key Private Bank, said, "With the labour market continuing to strengthen and economic growth remaining above trend,The Federal Reserve will assume that inflation is cooling, but not enough”。

Karen Karniol-Tambour, Bridgewater's co-chief investment officer, said:The Federal Reserve may cut interest rates more slowly than many market participants expected"When you look at what it takes to cut rates quickly, you usually need a rapid economic collapse," she said in an interview, "which is a far cry from where we are today."

The impact of four scenarios on the market

Analyst Yohay Elam said the following are four scenarios for the upcoming jobs report:

First, "Goldilocks" supports the stock market.

Given the increasingly dim background,The real estimate is close to 150,000 jobs, which will keep the dollar under pressure while keeping gold and stocks bought.This would be a "Goldilocks" scenario for a soft landing, indicating no more Fed rate hikes, but no imminent recession either.

Second,Small upside surprise and dollar upside correction。

Elam's baseline is a bit more optimistic.Non-farm jobs are expected to increase by nearly 200,000Since the beginning of 202,The employment report came as a surprise in almost all reportsriseTherefore, the possibility of exceeding expectations again cannot be ruled outMoreover, simply adding 170,000 would reverse the pessimism depicted by other data.

In this case,The dollar will make a much-needed upside correction, while gold and stocks will suffer some profit-taking。

And thirdly,A depressing situation——Winter is coming。

The above two scenarios are the most likely, but there are two other extremes to consider. If the previous weakness in employment data was just the appetizer of a devastating non-farm report, then "Goldilocks" would not appear.

If tonight's data falls below 100,000, it will raise the alarm of a recession, prompting safe-haven funds to flow into the dollar, while stocks will fall on fears of falling corporate profits. Gold prices may take advantage of lower Treasury yields to move slightly higher。

And four.optimistic outlook——The strong hiring trend continues and is likely to emergesubstantiallyrise。

At the other extreme are job opportunitiessubstantiallyIncrease, increase by more than 200,000, and possibly even more than 250,000. In this case, the November rate hike will be back on the negotiating table and the dollar willriseThe stock market will be volatile, and gold will undoubtedly plunge.

Markets are becoming more sensitive to data, Elam said.Due to the increase in uncertainty and the upcoming long weekend in the United States, the impact of the non-farm payrolls data is even more significantInvestors may be more willing to position squaring ahead of Labor Day in the U.S.Elam's basic assumption is that the non-farm payroll data slightly beat market expectations, triggering an upward correction in the dollarBut he also said,Investors should also be wary of the other three scenarios described above.