The projections of 2 million jobs lost as a result of the most recent stimulus extension are confirmed in the latest employment data. On net, the private sector lost 32,000 jobs in September. This is the largest announced jobs cut since March 2020 and sent shockwaves across economists and market analysts’ desks. The dour report revised downward the previous expectation by 3,000 jobs August loss. This compelling evidence adds urgency for the Federal Reserve to pursue further interest rate cuts at their upcoming meetings in October and December.
Detailed collapse
In the ADP jobs report, released on Wednesday, that terrible picture was further emphasized. Analysts across the board attacked the report as terrible, predicting that its ill effects will hang over the economy and affect market sentiment. Unruly sentiment like this can certainly threaten the dollar’s performance, particularly as we’re filled with uncertainty in terms of potential government shutdowns.
Traders are looking ahead to the Fed’s policy decision. Futures markets have almost completely priced in the possibility of rate cuts in both of those meetings. The future undercuts that bold economic vision with a triple whammy from recent job losses. To facilitate this economic expansion and respond to increasing public demand, we require accommodative monetary policy.
As market participants continue to process this news, they are facing the prospect of a government shutdown. In fact, historically shutdowns have never gone past 36 days. Since 1976, funding shortfalls have usually been settled in one to two weeks. Polymarket’s real-time odds currently predict almost a three-in-four chance of government shutdown. Unfortunately, it sounds like this closure could be permanent — at least through the end of next week. Adding to the situation is a general market hesitance. Those markets and analysts are hanging on September’s PMI numbers — short for Purchasing Manager Index — due out later this afternoon.
Now the delay in the nonfarm payrolls report further complicates matters. Most worryingly, it would drastically upend the future trajectories of both finance and economic analysis. Bleak employment numbers compounded by a tense outlook for political gridlock in DC is an ugly cocktail for the dollar. As such, it will be hard-pressed to make a comeback given these fierce headwinds.