The U.S. non-farm data is about to be released, and this is a piece of data that could rewrite market destiny.
First, the disappointing U.S. ADP employment data released last night has pushed non-farm data into the spotlight. After the ADP release, the possibility of a rate cut in July rose to 27%. If the non-farm data is particularly poor, this probability could increase to 50%—which means a July rate cut will officially be on the table. One reason the Fed has been able to remain patient before a rate cut is the good performance of the job market; therefore, if this situation changes, the Fed may be forced to act sooner.
Second, economists expect that non-farm employment will drop from 139,000 in May to 110,000 in June, with the unemployment rate rising to 4.3%. If the increase in non-farm employment is below 50,000, the market will clearly enter a 'July rate cut' mode.
Third, it is very rare for Federal Reserve officials to comment on the non-farm data before it is released.
Richmond Fed President Barkin stated that the slowdown in immigration affecting the U.S. labor force will make it difficult to interpret the economic conditions reflected in the upcoming employment data. It will be hard to determine whether the changes in the unemployment rate are due to an economic slowdown or a reduction in foreign labor.
His words sounded quite convoluted, simply put, he is hinting that this non-farm data could show an 'unexpected' result. This is a typical 'preemptive warning' logic, fearing that the market may overreact when the data is released. If Fed officials truly feel that the data will have no impact, they wouldn't come out to make a statement.
It is worth mentioning that Barkin made the above remarks on Fox Business News, clearly hoping that this statement would draw market attention.
