US Job Market Data in Focus as Fed Weighs Next Steps


Today, investors’ eyes will once again be turned toward the monthly data from the American job market. The last few months have shown that it is losing momentum, however, it still remains relatively strong. This week’s publications have painted a mixed picture. Tuesday’s JOLTS survey surprisingly showed positive results, while Wednesday’s ADP was negative, and yesterday’s number of unemployment benefit applications was at a low level. After falling below the 1.05 mark, the EUR/USD has been in a corrective upswing in recent days.

Tuesday’s JOLTS survey showed over 9.6 million job openings in the U.S job market, a result significantly higher than expected. This figure indicates that job demand is still high. The private ADP report, indicating the change in employment in the private sector, disappointed with a result of 89,000, however, as we know, it is not an indicator that is the perfect predictor before the government NFP report. Meanwhile, the latest weekly data didn’t show any alarming signals.

Surveyed economists from Bloomberg agency expect a change in employment of 170,000 – less than last month’s 187,000. At the same time, the consensus points to a drop in the unemployment rate from 3.8% to 3.7%. The dynamic of the average hourly wage is expected to be 4.3% year on year (like before) and 0.3% month to month (it’s up from 0.2%). Going into more details, the employment activity rate is expected to stay at 62.8%, showing the percentage of the population either working or actively seeking work. This indicator has been growing steadily since the pandemic collapsed and is gradually reaching levels that were observed before the lockdown.

Summarizing, the US job market is showing increasingly clear signs of the cooling desired by the Fed. From May to August, employment increased on average only by 150,000 job positions per month, a much slower pace than the increase of 400,000 monthly in 2022. Furthermore, the number of available job positions has noticeably decreased (despite the recent rebound). At present, job demand is decreasing which gradually translates into a (still slow) drop in the dynamics of wage growth.

Yesterday’s comments once again confirmed that the development of the job market situation plays an important role for the Fed. Mary Daly from San Francisco said that interest rates could remain unchanged if the job market and inflation continue to cool down. If this does not happen, the Federal Reserve may react and continue to raise the key interest rate. Therefore, it is understandable why the market is focusing on today’s publication. I assume that after the last dynamic strengthening of the USD, the forex market may react more sensitively to negative than to positive surprises.

Łukasz Zembik, Oanda TMS Brokers