US non-farm payroll report will be a major focus today and could seal the case for another FOMC rate cut later in the month. Fed fund futures are pricing in “only” 93.5% chance of another -25bps cut to 1.75 to 2.00%. Markets are expecting 162k job growth in August. Unemployment rate is expected to be unchanged at 3.7%. Average hourly earnings are expected to rise 0.3% mom.
Looking at other related data, ADP reported 195k growth in private sector jobs, which is positive. Four-week moving average of initial jobless claims was largely unchanged, edged up slightly from 211.5k to 216.3k. However, ISM manufacturing employment dropped sharply from 51.7 to 47.4, signaling contraction. ISM non-manufacturing employment dropped -3 pts to 56.2. Conference Board consumer confidence dropped slightly from 135.8 to 135.1. The over all set of data suggested some solid NFP readings today.
There is hope for some sort of progress in US-China trade negotiations in October. More importantly, as China stop short of retaliating against the latest round of 5% tariffs by the US, chance of further escalation has somewhat receded. Strong job numbers will give Fed policy makers more reasons to keep bullets at bay first.
