#AugustNFPReportComing

Yes, weak Non-Farm Payrolls (NFP) data could significantly reduce the likelihood of a Fed rate hike in September, but Average Hourly Earnings (ADP) alone will likely not be enough.

The key point is that the Fed is currently trying to balance two risks: weakening employment and still high inflation.

* ADP: +38,000 in August, the weakest increase in the private sector since January.

* NFP consensus: Approximately +53-56,000 compared to -23,000 in July. Unemployment is expected to be around 4.1%.

* Markets recently priced in a 25 basis point rate hike in September, around 60-65%, but Waller's comments have already lowered expectations.

Unemployment rate — likely more important if it jumps from 4.1%
Average hourly earnings — very important as inflation remains a problem for the Fed.

This is particularly important now, especially considering that August's services sector data showed strong demand and high price pressures while employment remained weak.

My comment:

If Non-Farm Payrolls (NFP) remain below ~30,000 + unemployment rises above 4.2% + wages fall → the likelihood of a rate hike in September may decrease.

Conversely:

If NFP is 75-100,000 + unemployment remains at 4.1% + wages increase by 0.3% or more on a monthly basis → the Fed will likely keep a rate hike on the table.

And there's an important point: the debate within the Fed isn't simply "weak employment = no rate hike." While Waller says he might support keeping rates steady if inflation continues to fall, Chairman Kevin Warsh is far more concerned that inflation isn't sufficiently under control.

Therefore, a weak NFP could halt an interest rate hike – but it would likely need to be weak enough to alter the Fed’s assessment of labor market risk, not just fail to meet its 55,000 forecast.

For the markets, I would pay particular attention not only to the main data but also to the combination of non-farm payroll data + unemployment figures + wages data.