Before the small non-farm payroll data
1. In the risk market, US stocks began to narrow the space for gains after midnight, and $BTC also started to gradually decline after midnight. The reason is that last night's July job openings data weakened the positive outlook.
2. Tonight's small non-farm payroll data is expected to be significantly lower than the previous value, which is in “conflict” with yesterday's job openings. Yesterday's job openings data also explained that inflation is stubborn, the economy is slowly declining, and employment is moderately decreasing. This is beneficial for interest rate cuts, while not bringing expected economic risks.
3. However, the current expectation for small non-farm payroll data shows that the speed of employment decline is too fast. Of course, this also benefits the pace of interest rate cuts, but under the circumstances of high inflation, economic slowdown, and accelerated employment decline risk, an interest rate cut at this time is considered “poison.” The market may worry that the interest rate cut is to avoid economic recession, thus triggering concerns about the possibility of economic recession. It may sound a bit convoluted, but simply put, once the market expects an economic recession, the greater the interest rate cut, the more the market worries.
4. If tonight's consumer data meets expectations, with accelerated employment decline, the risk market will still slightly expand the decline. If the data is just higher than expected, the market will ease slightly, after all, it has already finished worrying in advance.
5. Although the big non-farm payroll data has been questioned by multiple parties after the Labor Statistics Bureau director was dismissed by Trump, whether the subsequent data is for Trump’s “political” service, the new director has not yet taken office, and this data is still valued by the Federal Reserve. Small non-farm payroll data is not the focus of the Federal Reserve, so even if the market worries about significant downside risks in employment data, small non-farm payrolls will not completely guide market expectations.
6. Regarding employment, we still need to look at tomorrow's big non-farm payroll data to see if it shows a similar moderate decline as the July job openings data or if there is a risk of accelerated decline. This is quite important. Although it is a time for mourning, being too “down” may scare the market in the short term.
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