Title: Poor Non-Farm Payrolls Data Leads to Stock Market Decline in the US
The latest non-farm payroll data released in the US has disappointed the market, leading to a decline in the stock market. The data showed that the US added 142,000 non-farm jobs in August, falling short of the market’s expectation of 161,000. Moreover, the Labor Department revised down the employment data for June and July significantly.
The downward revision of the employment data for June and July has become a routine phenomenon. The July non-farm employment data was revised down by 25,000 to 89,000, and the June employment data was revised down by 61,000 to 118,000. This has raised concerns about the reliability of the US non-farm payroll data.
Despite the downward revision of the employment data, the US unemployment rate for August slightly decreased to 4.2% from the previous month, in line with market expectations. However, this contradiction between the employment data and the unemployment rate has led to confusion in the US stock market.
After the release of the non-farm payroll data, the S&P 500 futures index briefly rose before opening, but then fell sharply. The Nasdaq index also fell by 2.55% on the evening of September 6. The poor non-farm payroll data has once again increased concerns about the US economic slowdown.
Despite the disappointing non-farm payroll data, the Federal Reserve has continued to emphasize that the US economy has not yet entered a recession. Federal Reserve Vice Chairman Lael Brainard said in a speech that the US labor market is continuing to weaken but has not worsened. The US economy has neither entered a recession nor is expected to enter a recession.
However, many market participants remain skeptical of the Federal Reserve’s optimistic outlook. Some analysts believe that the Fed’s inflation is temporary argument in 2021 was just a joke, and Fed policymakers’ ability to tell white lies is a necessary skill.
The latest market expectations indicate that there is a high probability of a 25-basis-point rate cut by the Federal Reserve at its September 19 meeting. The probability of a 50-basis-point rate cut is 30%. However, the market’s concerns about the US economic slowdown have not diminished.
The Fed’s rate cut and the slowing pace of balance sheet reduction have raised concerns about a potential financial crisis. The Fed’s balance sheet shrank by $2.83 trillion from March 5, 2019, to June 4, 2021, an average of $943 billion per month. However, the pace of balance sheet reduction slowed to an average of $476 billion per month in the three months leading up to September 3, 2021.
The Fed’s balance sheet reduction is now seen as a way to pave the way for rate cuts. However, it is still uncertain when the Fed will shift from balance sheet reduction to expansion. It is believed that only when the US financial market faces a crisis will the Fed be forced to expand its balance sheet.
In summary, the US non-farm payroll data has once again raised concerns about the US economic slowdown, and the Fed’s rate cut and balance sheet reduction policies have become the focus of the market’s attention. However, the Fed’s ability to control the market’s expectations remains uncertain.
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