#非农就业报告即将揭晓 Bank of America: Friday’s nonfarm payrolls report unlikely to “settle the matter”; CPI remains key to September rate hike
Amid intense recent volatility in the bond market, investors are awaiting two key U.S. data releases that could influence the Federal Reserve’s decision: the August nonfarm payrolls report due this Friday and the August Consumer Price Index (CPI) to be released on September 11. But in Bank of America’s view, the two data points carry different weight at the Fed’s September 15–16 policy meeting. The bank believes the nonfarm payrolls report is more like an “appetizer,” while the “main course” that will truly determine whether the Fed raises rates remains the CPI.
Bank of America analysts said Wednesday: “The nonfarm payrolls report is unlikely to be the decisive factor for a September rate hike. A significantly weak report could lower the probability of a hike, but CPI remains the key data point determining whether the Fed will deliver a rate hike. We maintain our call for a September rate hike.”
Nonfarm payrolls matter, but are not enough to “settle the matter”Currently, the market expects August CPI to rise 3.4% year over year, unchanged from July.
However, with inflationary pressures stemming from the U.S.-Iran war not yet abating, the actual figure could still come in above expectations. The labor market itself is also showing signs of cooling. The “ADP private payrolls” report released on September 2 showed that U.S. companies added 38,000 private-sector jobs in August, below economists’ expectations of 48,000 and the lowest increase in seven months.
Bank of America therefore believes that unless Friday’s nonfarm payrolls report delivers a clear downside surprise, the employment report will be unlikely to become the final determining factor in the September FOMC meeting’s debate. The bank particularly stressed that inflation remains the Fed’s greater concern at present. This view contrasts with the market’s previous reaction to employment data. After U.S. nonfarm payrolls fell by 23,000 in July, the market briefly lowered expectations for a September rate hike; Bank of America, however, continued to believe that the Fed would keep raising rates this year and expected it to begin the rate-hike cycle in September.
Warsh has shifted policy focus further toward inflation
Federal Reserve Chair Kevin Warsh’s speech in Jackson Hole last week further increased the importance of inflation data for September’s policy decision. Warsh described the U.S. labor market as generally stable and consistent with full employment, while emphasizing that inflation remains above the Fed’s target.
In Bank of America’s view, as long as employment data do not show a very significant deterioration, policy discussions at the September FOMC meeting will continue to focus primarily on inflation. Bloomberg Economics analysts Anna Wong, Andrew Sacher, and Eliza Winger said Warsh’s hawkish speech in Jackson Hole increased the likelihood of a September rate hike and changed how the market would interpret economic data over the coming week.
The three analysts said: “The August employment report will still be the headline data point, but we expect it to be underwhelming, and its impact this time may be less significant than usual.” They further explained that Warsh had already described the labor market as being in good condition and noted that weak employment growth was often attributable more to demographic factors than signs of an economic recession. This means that even if August nonfarm payrolls are weak, as long as there is no clear deterioration significantly beyond expectations, the market will still need to await the September 11 CPI report to determine whether the Fed will deliver a September rate hike.