Economy

It’s tough to overstate how much hinges on Friday’s employment update, from the path for interest rates to the economic outlook.A fresh jobs report set for release on Friday could mark a turning point for the American economy, making it one of the most important and closely watched pieces of data in years.The employment numbers will shed crucial light on whether a recent jump in the unemployment rate, which tracks the share of people who are looking for work but have not yet found it, was a blip or the start of a problematic trend.The jobless rate rose notably in July after a year of creeping higher. If that continued in August, economists are likely to increasingly worry that the United States may be in — or nearing — the early stages of a recession. But if the rate stabilized or ticked down, as economists forecast, July’s weak numbers are likely to be viewed as a false alarm.The answer is coming at a pivotal moment, as the Federal Reserve moves toward its first rate cut since the 2020 pandemic.Central bankers have been clear that they will lower interest rates at their meeting on Sept. 17-18. Whether that cut is a normal quarter-point reduction or a larger half-point move could hinge on how well the job market is holding up. It is rare for so much to ride on a single data point.“It matters a lot,” said Julia Coronado, founder of MacroPolicy Perspectives, a research firm. “It’s going to set the tone for the Fed, and that’s going to set the tone for global monetary policy and markets.”Unemployment and UnderemploymentThe jobless rate historically jumps during recessions.

Unemployment is the share of people actively looking for work; underemployment also includes people who are no longer actively looking and those who work part time but would prefer full-time jobs.Source: Bureau of Labor StatisticsBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

$75 per monthComplete digital access to quality FT journalism with expert analysis from industry leaders. Pay a year upfront and save 20%.What’s included Global news & analysisExpert opinionFT App on Android & iOSFT Edit appFirstFT: the day’s biggest stories20+ curated newslettersFollow topics & set alerts with myFTFT Videos & Podcasts20 monthly gift articles to shareLex: FT’s flagship investment column15+ Premium newsletters by leading expertsFT Digital Edition: our digitised print edition More

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(Reuters) – The Federal Reserve needs to cut interest rates to keep the labor market healthy, but it is now down to incoming economic data to determine by how much, San Francisco Fed President Mary Daly said on Wednesday. “As inflation falls, we’ve got a real rate of interest that’s rising into a slowing economy; that’s a basic recipe for over-tightening,” Daly told Reuters in an interview. Labor market health, she said, has to be “sustained and protected, and we have to be very mindful that if policy is overly tight, you might get additional slowing in the labor market, and to my mind, that would be unwelcome.” So far, though, the labor market has softened but is still healthy, she said. Daly and her colleagues are widely expected to cut interest rates at their upcoming policy meeting, on Sept. 17-18. The Fed raised borrowing costs rapidly in 2022 and 2023 and has held the policy rate in the 5.25%-5.50% range for more than a year to bring down inflation. Most analysts expect the Fed to stick to a quarter-point rate cut at the September meeting, though analysts are keenly awaiting the U.S. Labor Department’s August monthly employment report, due on Friday, for any sign of further job market softening that could trigger a bigger Fed response. Financial markets earlier on Wednesday added to bets on an upsized half-point rate cut this month after government data showed U.S. job openings in July fell to the lowest level in three and a half years, and the ratio of job openings to job seekers – a metric of labor market tightness — is now below the pre-pandemic average. To Daly, however, the report showed a labor market that is in balance but not weak.”It’s hard to really find evidence that it’s even faltering,” she said. Wages are growing faster than inflation and workers are still finding jobs. And while businesses tell Daly that they are being “frugal” with hiring, they are not “dusting off their layoff manuals,” she said. The Fed reserves “aggressive” moves for times when the outlook is certain, she said – for instance, the 2020 pandemic shutdowns, which triggered the Fed’s decision to slash rates to near zero. The current outlook is less certain, Daly said, adding that as she talks to people in the communities she visits, they still name inflation as their number one concern. “We do not have price stability,” she said. With inflation still running above the Fed’s 2% goal, “we have to continue to assert downward pressure on it.”As for how big a rate cut is needed, “We don’t know yet, right?” Daly said. “We have a labor market report, we have a CPI report, we have all of our contact information — I’m in the midst of collecting all this information,” adding that she’ll also need to discuss the data with her staff and her policymaking colleagues. “I want more time to do all the work that’s needed to do to make the best decision.” The Fed needs to keep the labor market about where it is now, with an expectation it will continue to expand, Daly said, “if people are going to regain some of the losses from the high inflation period, and also if we’re going to get to this place and people go look back and say, ‘Okay, we got inflation down, gently, without breaking the economy.’ That’s the goal.” More

SINGAPORE (Reuters) – The dollar dipped on Thursday as traders ramped up bets for a supersized rate cut from the Federal Reserve later this month, with the yen a notable outperformer on safe-haven demand as concerns over the U.S. economy’s growth outlook resurfaced.Global markets have been on edge and stocks, in particular, badly bruised, after softer-than-expected U.S. data out this week reignited concerns that the growth outlook of the world’s largest economy was less rosy than earlier thought and that the labour market could be slowing more sharply than expected.That has led to investors fleeing risky assets in search of safety, with the yen one of the biggest beneficiaries.The Japanese currency was last 0.26% stronger at 143.56 per dollar, having already gained nearly 2% for the week thus far.The Swiss franc, also a traditional safe-haven currency, steadied at 0.8461 per dollar, though its 0.46% gain for the week to date was more subdued compared to the yen’s rise.”The markets are getting anxious,” said Hemant Mishr, chief investment officer at S CUBE Capital in Singapore.”There was a time when the markets were just focusing on positive news. There’s a perceptible change, the market is now focusing on negative news and rationalising a sell-off.”Data released on Wednesday showed U.S. job openings dropped to a 3-1/2-year low in July, suggesting the labor market was losing steam, with the figures coming after Tuesday’s ISM manufacturing survey which remained in contraction territory.”Job openings data for July showed few signs of the ongoing cooling in the labor market coming to an end,” said economists at Wells Fargo in a note. “For the Fed, (the) data reaffirm that the labor market is no longer a source of inflationary pressure to the U.S. economy.”Investors have in recent times placed heightened importance on any data relating to the health of the U.S. labour market, given the Fed’s focus on protecting it.The U.S. dollar remained on the backfoot in early Asia trade, with the euro steady at $1.1083. Sterling was little changed at $1.3147.Against a basket of currencies, the greenback fell marginally to 101.25.Traders are now pricing in a 44% chance of an outsized 50-basis-point rate cut when the Fed meets later this month, up from 38% a week ago, according to the CME FedWatch tool.Still, the focus remains on Friday’s nonfarm payrolls report, where expectations are for the U.S. economy to have added 160,000 jobs in August, compared with July’s 114,000 increase. The unemployment rate is forecast to ease slightly to 4.2%.”Our estimate for Friday is it’ll be at a 4.2 to 4.3% number. If it’s more than 4.5%, I think people will start expecting a 50bp cut,” said S CUBE Capital’s Mishr, referring to the unemployment rate.In other currencies, the Australian and New Zealand dollars were weighed down by the risk off mood on Thursday.The Aussie fell 0.15% to $0.67155, while the kiwi was last 0.2% lower at $0.6186. More