Wall Street will need another “Goldilocks” number of next week’s employment report as investors are wary of pullbacks. The September non-farm salary report, scheduled to be released Friday, is expected to have a greater than usual impact on the market as it determines the unusually biased path for the Federal Reserve monetary policy. The market is the final price set for the remaining two interest rate cuts in 2025, the same as the central bank itself projected at its last meeting. Stock prices have risen at the back of the Fed’s forecast. But that outlook is at the mercy of upcoming reports, and what will be readily apparent to investors is that Friday’s employment data will need to hit the sweet spot for the data-dependent Fed. It’s not so hot that it turns policy makers into hokish. It’s not too cold to show a big slowdown. “If you saw the job actually look pretty strong, you might be saying, ‘Oh, no, where’s my rate cut?’,” said Marta Norton, chief investment strategist at Empower Investments. “And if you see work falling apart, you’d say, ‘Oh, no, the recession.’ “It’s certainly possible that there will be no employment report on Friday at all. If Democrats and Republicans fail to reach a compromise on the federal funding bill, that could mean a government shutdown that delays non-farm pay reports after September 30th. The new normals that employment data for September are likely to show are new normals. The days when heading numbers were consistently printed between 150,000 and 200,000 are over. Instead, in recent months, non-farm pay reports have solidified that the US labor market is on a downtrend. In August, only 22,000 government and private sector jobs were added. In July, the headline number reached 73,000, resulting in a sudden decline in the past few months. June data fell to 13,000 job losses, the first negative printing since the height of the coronavirus pandemic. Economists expect the report on Friday to show just 59,000 headlines and the unemployment rate will remain stable at 4.3%, according to FactSet’s consensus estimates. They also expect the second one of the year, potential negative printing, is not out of the question. The market may be able to take a significant amount of weaker headlines as long as it stays within the break-even pace of employment growth. In other words, it won’t shake up as much as changing the unemployment rate. Gregory Daco, chief economist at Ey-Parthenon, said the number could be between zero and 50,000. However, he highlighted the risks of employment reporting for next week’s monetary policy. The strong numbers he highlighted could go above 50,000 and below 150,000, potentially damaging interest rate prospects. “I think what we saw on the dot plot was an increase in polarization among Fed policymakers,” Dako said. “And we’ll see how the report turns out, but the pay report will have this importance in determining whether data-dependent policy makers will decide whether they want or prefer back-to-back rate reductions in October.” Seasons Wall Street in October is also caulking towards the beginning of the new month. September concluded with solid profits, with Nasdaq Composite attracting 4.8% this month. The Dow Jones industrial average is 1.5% higher. The S&P 500 rose 2.8%. But on Friday, the main averages concluded the losing week and stumbled on technology trade that hampered recent advances in the market. Concerns over the government shutdown also loomed, and what House minority leader Hakeem Jeffries warns on Thursday would not be “blackmailed” by the Trump administration’s warnings to federal agencies to prepare for mass shootings. If a shutdown occurs, it can cause many knock-on effects, including delayed economic data. Even without this possibility, October can bring more volatility. According to the Stock Trader’s Yearbook, the worst six months of the year ends in October. It is also a month where many major crashes were historically occurring, such as 1987, 1997, and 2008. Furthermore, the market itself trades at valuations that warn many investors. The S&P 500 trades at a forward multiple of over 22 months, suggesting that the broad market index is vulnerable to short-term pullbacks. “The market can easily grind high. There’s no need to time the market. But “Hey, these positions in my portfolio have gone anywhere. These others can’t stop running. I’m just going to rebalance a little,” said Empower’s Norton. “I think it’s a really smart strategy in a market like this that has momentum, but really high ratings,” she added. Calendars for a week ahead, etc. Monday, September 29th at 10:00am Home Sales Index Pending (August) 10:00am Home Sales (August) 10:30am AM Dallas FED Index (September) Revenue: Carnival Tuesday, September 30th FHFA Home Price Index (July) 9:00am S&P/Caseshiler Comp. Jolz Job Opening (August) Revenue: Lamb Weston Holdings, Pasix, Nike Wednesday, October 1 8:15 ADP Employment Survey (September) 9:45AM S&P Global PMI Last Manufacturing (September) 10:00AM Construction Cost (August) 10:00AM ISM Manufacturing (September) Claims (09/27) 10:00AM Durable Order Source Transport (August) 10:00AM Permanent Order (August) 10:00AM Factory Order (August) Friday, Friday, October 3 1:15AM Hourly Revenue (September) 8:30AM Average Work Reserve (September) 8:30AM (September) 8:30AM (September) 8:30AM AM Private Non-Farm Salary (September) 8:30am Unemployment Rate (September) 9:45am S&P Global PMI Composite Final (September) 10:00am ISM Services PMI (September)
