Opinion: This Week's Employment Data Will Further Confirm the Fed's Rate-Cutting Trend

On September 1st, which is this Friday, the US will release the August seasonally adjusted non-farm payroll report. A survey of top economists by The Wall Street Journal indicates that the expected job creation for last month is merely 75,000, and the unemployment rate may rise from 4.2% to 4.3%, reaching a nearly four-year high. Bill Adams, the Chief Economist at U.S. Bank, stated that for the financial markets, the most favorable situation is for the upcoming employment report to show moderate job growth and a slight increase in the unemployment rate. This would suggest that the economy is not in a recession but also demonstrate sufficient labor market softness to justify the Fed's rate cut. On the contrary, the most unfavorable situation is if the employment report shows a decrease in the number of jobs, a drop in the labor force participation rate, and a decline in the unemployment rate. This would mean a reduction in labor supply while labor demand is also weakening, presenting a problem that the Fed may not be able to handle. With the Fed likely to cut rates in September, investors will once again start to evaluate when "bad news is good news" and when "bad news is just bad news." In other words, when will weak economic data provide the Fed with more room for rate cuts (bullish for the stock market), and when will weak economic data arouse growth concerns (bearish for the stock market)? This may ultimately depend on why the Fed is cutting rates and what will happen after the rate cut. (FX168)