August Nonfarm Payroll Report Released: Market Expectations for Fed Rate Cuts Remain Unchanged, September CPI Data Becomes Key | Moomoo Research

The S&P 500 Index has recently experienced volatility, closing down 1.73% at 5,408.42 points on September 6, reflecting heightened market tension.

Coinciding with this sensitive period, the U.S. released the nonfarm payroll report for August on the same day. This report is a focal point for financial markets and may influence the Federal Reserve's interest rate decision on September 18. Although the employment data in August showed improvement compared to July, overall, the data still indicates weakness in the U.S. labor market, failing to fully alleviate concerns about an economic recession.

Specifically, the U.S. added 142,000 nonfarm jobs in August, a figure that is below the expected 160,000 but an increase from July's 89,000. The unemployment rate fell to 4.2%, in line with market expectations and down from 4.3% in July. Additionally, average hourly earnings increased by 0.4% month-over-month, exceeding the expected 0.3%. Nevertheless, these data points are not strong enough to dispel market concerns about a recession.

Following the data release, the market reacted quickly: U.S. stocks and gold prices fell, while the dollar index and U.S. Treasury yields rose. Although market expectations for Fed rate cuts did not change significantly, a reduction of 100 to 125 basis points by the end of the year is anticipated, with the probability of a 50 basis point cut in September estimated at about 30%.

The Federal Reserve's policy decisions are influenced by multiple factors, including changes in inflation, the long-term downward trend of the natural rate, and increasing risks of financial system instability. These economic factors, combined with the impact of political and social environments, collectively shape the Fed's policy tools, framework, and communication strategies.

Currently, signs of improvement are emerging in the U.S. economic growth and employment indicators. The Fed's models predict that GDP growth in the third quarter may still exceed 2%, indicating that while economic growth has slowed, the U.S. economy has not reached recession levels. However, there remains a divergence in market opinions regarding the extent of rate cuts by the Fed at the September meeting.

In this context, the upcoming release of August CPI data on September 11 becomes particularly important. This data will not only provide the latest information on inflation but may also offer crucial insights for the Fed's rate cut decision at the meeting on September 18. Therefore, we should closely monitor the release of this data to better understand the potential policy direction of the Federal Reserve.