On Tuesday, September 9, the United States Bureau of Labor Statistics (BLS) will announce the preliminary benchmark revisions. In each of these updates, we’ll look specifically at its new and valuable Establishment Survey Data. This forward-looking report, essential to all forex traders, will make projections for the 12-month period ending in March of 2025. The BLS is preparing to release the latest round of these revisions. As a result, some analysts are closely watching to see how this could affect the Fed’s future actions on interest rates.
Nonfarm Payrolls (NFP) are one of the most closely watched components of the monthly jobs report. It is an important bellwether for the overall economy. Monthly swings in payrolls can be extremely volatile, muddying the waters for market reaction and policymakers’ judgement about the economy’s aggregate performance. The coming rulemaking would greatly change these dynamics again, especially given today’s concerns over labor market conditions.
Importance of the Monthly Jobs Report
The highlight of the month, of course, is first Friday release of the BLS jobs report on November 3rd. This event is one of the most hotly anticipated days on the financial calendar. Forex traders consider this report to be one of the most critical economic indicators, shaping expectations for interest rates and market movements.
Nonfarm Payrolls is one of the most important numbers in this all-important jobs report. It shows the change in employment for all sectors except farms, government, and a few other sectors. The participation rate and average weekly hours reported are much more valuable in influencing both market sentiment and economic understanding.
“We maintain our view that headline payrolls and unemployment data underplay the degree of labour-market softening given distortions from the birth-death adjustment and the more clear-cut decline in the employment-population ratio.” – Steve Englander
Market observers are quick to point out that the headline figures look healthy. Deeper trends show that the picture of labor market health is not so straightforward. As such, future amendments are expected to offer additional guidance on these questions.
Expected Revisions and Their Significance
The tentative amendments set to be released for public comment next week will include a final change to employment data covering the period of April 2024 to March 2025. As Steve Englander of Standard Chartered noted, these are positive developments. Each wants to think they might set the stage for the Federal Reserve’s first 50 basis points (bps) cut.
Englander stated, “We recognize that we are moving early, but we expect preliminary revisions to employment data for April 2024 to March 2025 to support our 50bps call.” As a result, analysts are hastily shifting expectations for the Fed to counter with an even more aggressive monetary policy. This change coincides with the story of labor market dynamics still being written.
The impact of these amendments goes further than what the markets are reacting to. Congressional policymakers as well as Federal Reserve monetary policymakers are sensitive to fluctuations in Nonfarm Payrolls. They rely on this data to evaluate economic conditions and calibrate monetary policy accordingly. Those risks to the labor market began to be emphasized by Fed Chair Jerome Powell in recent statements.
Labor Market Dynamics and Policy Implications
As National Journal reported in a write-up, recent remarks by Powell indicate stricter immigration policies are among the factors behind an “abrupt slowdown” in labor force growth. The combination of these factors has increased fears over whether the economy can continue its current pace without more workers.
As the labor market evolves, Federal Reserve officials are likely to weigh these challenges alongside inflationary pressures and overall economic growth. The forthcoming jobs report, as well as its future revisions, will be crucial to guiding their decisions in the months ahead.
To be sure, labor market participants are acutely aware that shifts in the labor market can have long-lasting effects on monetary policy. An unexpected sharp drop in Nonfarm Payrolls or additional labor market data would likely require a Fed response. They could even change their interest rate policy sooner or more vigorously than they’re currently signaling.
As the day draws near for the Bureau of Labor Statistics to release its corrected employment data, traders and analysts across the country are on staff. Labor market developments and Federal Reserve policy are tightly linked. They are going to shape economic perceptions in a big way in the months to come.