The US non-farm data will be released tonight. Is a big one coming?
Today, I specifically and systematically studied the definition of non-farm data and the logic of its impact on the market What is the US non-farm employment data and what impact will it have on the market.
Before this, I always had a simple concept: a sharp drop in employment data means that the economy is not good, which will further force the Federal Reserve to cut interest rates, which is good for the cryptocurrency world. On the contrary, if the employment data is very good, it means that inflation is still stubborn and the Federal Reserve will not rush to cut interest rates, which is bad for the cryptocurrency world.
But after some research today, I found that the market is not such a simple inverse relationship. We also need to consider the situation of wage growth. JPMorgan Chase predicts that there will be 9 different situations in tonight's non-agricultural data, corresponding to different market reactions
Scenario 1: Substantial growth in non-farm payrolls + strong growth in average hourly earnings -- this means a strong economy and high wage inflation pressure, which reduces the possibility of a rate cut in September and is bearish for risk markets
Scenario 2: Substantial growth in non-agricultural employment + wage growth in line with expectations: In this scenario, stagflation concerns will be alleviated and "the soft landing argument will continue, which is good for the market."
Scenario 3: Big nonfarm payroll growth + weaker-than-expected wage growth: This is a "positive outcome, but the upside potential is not great because it would likely mean a large increase in part-time or low-income jobs."
Scenario 4: Nonfarm payrolls + strong wage growth: This result suggests that inflation will persist amid a tight labor market, which would be a very bearish sign.
Case 5: Non-agricultural population + wage growth are in line with expectations: This situation indicates that the economy is normalizing, not deteriorating. Under this result, the market is cautiously optimistic
Scenario 6: Nonfarm payrolls meet expectations + wage growth is weaker than expected: This is a "slightly positive result" that will ultimately increase the likelihood of a September rate cut, which is good for the market
Scenario 7: Disappointing non-farm payrolls + higher-than-expected wage growth: This would be the worst outcome for market bulls, a big negative
Scenario 8: NFP below expectations + wage growth in line with expectations: In this scenario, even if Treasury yields fall and investors turn back to large-cap tech stocks, the market is slightly bearish.
Scenario 9: Both non-farm payrolls and wage growth are lower than expected: Risk markets will not react much to this result, as concerns about a recession will intensify, but the possibility of a rate cut still exists, and the market is likely to be volatile.
