Future
Investors Brace for a Jobs Wipeout
Economists forecast that a revision to payrolls data could undercut a robust picture of the labor market, further pressuring the Federal Reserve to cut rates.
Concerns about a hiring slowdown have investors on edge.Credit…Nam Y. Huh/Associated Press
Are jobs really vanishing?
The torrid weeklong stocks rally has taken a breather as investors again shift their focus to the weakening labor market.
With inflation in retreat, the steady rise in unemployment is expected to receive added attention from Jay Powell, the Fed chair, and his colleagues at the annual Jackson Hole economic symposium that begins tomorrow. On Wednesday, markets will face another big test when the Bureau of Labor Statistics publishes its annual payroll revisions data, a release that has investors on edge.
A topsy-turvy run in the markets has renewed focus on the economy. Weaker hiring data at the start of the month helped prompt a big sell-off in global stocks and other risky assets. But investors stormed back into the markets last week after better-than-expected retail data, which suggested that consumer resilience might help avert a recession.
Despite the wild swings, the S&P 500 is up about 1 percent for August so far.
Investors are bracing for Wednesday’s payroll figures, which economists say could see up to 1 million jobs disappear from previous tallies. Normally, this accounting update gets little attention, because the revisions apply to data that can be more than a year old. (Last year’s announcement wiped out 306,000 job gains, but markets largely shrugged off the news.)
But a jumbo-size revision could add more pressure on the Fed, which has faced more questions about whether it has waited too long to cut interest rates and risked an economic downturn. Adding to the volatility: Bond traders are making huge bets (with borrowed funds) that the Fed will soon cut rates.
Markets on Wednesday are pricing in a rate cut in September, the Fed’s first in four years. But by how much? A big revision on Wednesday, followed by a lackluster report on Sept. 6 could add to the calls for an aggressive cut — and reignite a political debate. (Donald Trump has warned the Fed not to cut until after Election Day, while Senator Elizabeth Warren and other Democrats have urged the central bank not to delay.)
