Will the September Jobs Report Meet the Fed’s Expectations?

With the Fed on the verge of tapering, September’s result could be critical. How likely is September’s NFP going to meet the Fed’s expectations? Find out in our latest market analysis.

Fed Signals Tapering Could Come As Soon As November

August’s non-farm payrolls report was a huge disappointment to the market. The US economy added only 235,000 jobs in August, roughly three times fewer than market forecast of 750,000 jobs.

Despite the sorely missed expectations, the Federal Reserve (Fed) mentioned at its September FOMC press conference that the economy is not far from achieving its goals on inflation and employment, and that the tapering announcement could come as early as November. Stay alert and watch the news closely

“Reasonably Good” Is Good Enough

Considering what the Fed said, the upcoming NFP could be a determining factor in kickstarting Fed’s plans to reduce its $120-billion-a-month asset purchases.

Interestingly, the Fed is not looking for a phenomenal report.

“It wouldn’t take a knockout, great, super strong employment report. It would take a reasonably good employment report for me to feel like that test is met,” said Fed Chair Powell at the September FOMC press conference.

All Eyes on Friday

With the upcoming report being the last nonfarm payrolls before the next FOMC meeting in November, the market is anxiously waiting for the data to foresee the Fed’s decision on tapering.

Economists predict that the US economy would add 488,000 jobs in September, more than double August’s disappointing result.

The optimism is not groundless. Recent data from ADP and ISM Manufacturing Employment Index has shown that job growth picked up in September.

Private payrolls increased 568,000 last month, exceeding market expectations of 428,000 jobs.

On the other hand, the ISM U.S. manufacturing index climbed from 59.9% to 61.1% in September. The reading was also the highest in four months.

This is how the market reacts prior to the event:

• Gold: The precious metal edged higher and broke above $1,760 despite the broad US dollar strength.
• US Dollar: The US Dollar Index (DXY) reached new 2021 highs above 94 last week. The greenback maintains its uptrend momentum on investors’ predictions that the Fed would begin rolling back its bond purchases programmes as early as November.