Recently, I took a look back at market expectations ahead of the release of U.S. non-farm payroll data, and found that there was quite a big divergence among major institutions at the time.

First, let’s talk about the consensus expectations: in August, the number of new jobs was expected to be 75k, the unemployment rate was projected to rise from 4.2% to 4.3%, and year-over-year wage growth was expected to fall from 3.9% to 3.7%. But these are just headline figures—the story behind them is more interesting.

Goldman Sachs’ forecast at the time was 60k, which was significantly lower than the consensus. Their research found that over the past ten years, the August non-farm payroll data has always come in below expectations, and this has effectively become a pattern. By contrast, Bank of America was bullish and expected 90k jobs. The gap between the two major banks’ forecasts was 30k jobs, and that discrepancy alone already highlights the uncertainty in the market.

What truly drew attention was the revision figure. Since the beginning of this year, the initial figures for each month have been revised downward. Combined with the fact that July’s return/recall rate was not ideal, Nomura Securities estimated that the annual baseline revisions could amount to 600k to 900k positions, with an average monthly downward adjustment of 50k to 75k. This suggests that the labor market softness may be more severe than what the surface data indicates.

From the Federal Reserve’s perspective, a rate cut in September is basically a done deal. At that time, the CME FedWatch tool showed that the probability of a 25 basis point cut was as high as 97.6%, with expectations for two rate cuts within the year. If the non-farm payroll data is revised downward again as before, it’s even possible that the market would price in a 50 basis point rate cut. However, Nomura believes that even if the data is weak, the Fed is more likely to stick to the 25 basis point pace unless there is a wave of layoffs or financial stress intensifies.

The complexity of the market reaction is that weaker-than-expected non-farm payroll data would boost rate-cut expectations, but at the same time it would also imply that the economy may be slowing down. This conflicting signal creates uncertainty for assets such as U.S. stocks, the U.S. dollar, and gold. Weak data typically supports gold, while strong data tends to cool down rate-cut expectations. In short, after the non-farm payroll release, the market’s direction depends on how much the data deviates from expectations and on the market’s reassessment of the economic outlook.