OPINION
Market Rating Before FOMC MeetingJan 31
Nonfarm Payrolls will determine the next rate hike of the Federal Reserve
On the last trading day of the week, which was a relatively calm in terms of the news and macroeconomic data flow, international markets focused on the non-farm payrolls report, which will reveal labor conditions in the world's largest economy.
Estimates for the June labor statistics, which will be published by the Bureau of Labor Statistics (BoLS) of the US Department of Labor at 14:30 today, are that the number of nonfarm payrolls will increase by 250 thousand.
As BolS reported, in May, nonfarm payrolls exceeded market expectations of 325 thousand and registered as 390 thousand, while the unemployment rate was 3.6 percent and the increase in average hourly income was 5.2 percent year-over-year.
At this point, labor statistics are of critical importance for financial market actors as the determinant of the pace of monetary tightening of the US Federal Reserve. Because the Fed raised its federal funds target to the range of 1.50 – 1.75 percent with a tightening of 75 basis points, the largest scale in 28 years, at June meeting. Fed Chair Jerome Powell, on the other hand, stressed that tightening at this level is an unusual thing and said that the pace of rate hikes will depend on incoming economic data at the incoming meetings.
However, since the June meeting of the Federal Open Market Committee (FOMC), a new recession concern has started worries in international markets.. In particular, the tightening cycle of central banks of developed and developing countries that followed the Fed's aggressive rate hikes, the surge caused by the Russia–Ukraine war that is in its 5th month, the coronavirus shutdowns in China and the slowdown signals observed in the European economy with the Russian gas cut-off stand out here.
Data that will demonstrate whether the labor market is tight and how long the Fed will continue with its aggressive monetary tightening will respond to the debate over whether it will risk suffocating the economy. As a matter of fact, in the minutes published for the last meeting of the FED, almost all participants were reported to agree on a rate increase of 50 or 75 basis points in July.
To SUM UP, in the data set that the Department will announce, nonfarm payrolls and average hourly earnings will be the main ones that the markets will closely follow. If nonfarm payrolls exceed the market estimates of 250 thousand and annual average hourly incomes increase more than the expectations of 5.0 percent, the labor market conditions in the US economy might be extremely strong and wage pressure on inflation may begin. In addition, it can anchor the Fed's rate hike expectations for the July meeting to 75 basis points. This, in turn, may increase the downward impact of the dollar on assets with high relative risk sensitivity. On the other hand, lower-than-expected results will indicate that labor market conditions are improving, may create pricing behavior in such a way that the Fed will reduce the pace of tightening more carefully to control inflation.
Estimates for the June labor statistics, which will be published by the Bureau of Labor Statistics (BoLS) of the US Department of Labor at 14:30 today, are that the number of nonfarm payrolls will increase by 250 thousand.
As BolS reported, in May, nonfarm payrolls exceeded market expectations of 325 thousand and registered as 390 thousand, while the unemployment rate was 3.6 percent and the increase in average hourly income was 5.2 percent year-over-year.
At this point, labor statistics are of critical importance for financial market actors as the determinant of the pace of monetary tightening of the US Federal Reserve. Because the Fed raised its federal funds target to the range of 1.50 – 1.75 percent with a tightening of 75 basis points, the largest scale in 28 years, at June meeting. Fed Chair Jerome Powell, on the other hand, stressed that tightening at this level is an unusual thing and said that the pace of rate hikes will depend on incoming economic data at the incoming meetings.
However, since the June meeting of the Federal Open Market Committee (FOMC), a new recession concern has started worries in international markets.. In particular, the tightening cycle of central banks of developed and developing countries that followed the Fed's aggressive rate hikes, the surge caused by the Russia–Ukraine war that is in its 5th month, the coronavirus shutdowns in China and the slowdown signals observed in the European economy with the Russian gas cut-off stand out here.
Data that will demonstrate whether the labor market is tight and how long the Fed will continue with its aggressive monetary tightening will respond to the debate over whether it will risk suffocating the economy. As a matter of fact, in the minutes published for the last meeting of the FED, almost all participants were reported to agree on a rate increase of 50 or 75 basis points in July.
To SUM UP, in the data set that the Department will announce, nonfarm payrolls and average hourly earnings will be the main ones that the markets will closely follow. If nonfarm payrolls exceed the market estimates of 250 thousand and annual average hourly incomes increase more than the expectations of 5.0 percent, the labor market conditions in the US economy might be extremely strong and wage pressure on inflation may begin. In addition, it can anchor the Fed's rate hike expectations for the July meeting to 75 basis points. This, in turn, may increase the downward impact of the dollar on assets with high relative risk sensitivity. On the other hand, lower-than-expected results will indicate that labor market conditions are improving, may create pricing behavior in such a way that the Fed will reduce the pace of tightening more carefully to control inflation.
