All eyes will be on the US employment report data today, as investors try to gauge the extent of emerging weakness in the US labour market as a means to determine what kind of monetary policy reaction lies ahead. The Fed has just about declared victory on the inflation front, and is now more sensitive to labour market outcomes. The September employment data may well be the last clean reading of the US labour market before Fed policymakers meet in November. Consensus expectations suggest that the data should point to some resilience, likely overstating labour market strength.
After two months of decline, US nonfarm payrolls increased to 142k in August, recovering from a three-year low of 89k in July. Job gains in the leisure and hospitality, healthcare and social assistance, and construction sectors largely drove this rebound. Economists surveyed by Bloomberg predict a slight drop in job additions to around 140k in September, still below this year’s average. This trend indicates continued signs of a labour market that is gradually weakening, albeit at a slower pace than the market previously expected. Notably, this is against a backdrop of a market that had priced in 75bp worth of rate cut risk at this year’s remaining two policy meetings, and has since had to pare those bets in recent days as the US economy has proven to be more resilient than expected.