Anticipated Employment Data Sparks Market Uncertainty

Anticipated Employment Data Sparks Market Uncertainty 

The upcoming employment data, while potentially credible, lacks trustworthiness due to recent months of manipulated and unreliable reports. Goldman trader John Flood refers to this data as the "appetizer" before the more significant Consumer Price Index (CPI) report on April 10th.

Expectations suggest a slowdown in payroll growth for March, likely falling below recent averages. Various indicators of the labor market have shown mixed signals, with some surprising to the upside while others indicate a more stagnant situation. Federal Reserve Chair Powell has indicated that significant deterioration in the labor market could prompt rate cuts, but also noted that unexpectedly strong job growth wouldn't necessarily fuel inflation, citing factors like increased labor supply from illegal immigration. However, there's pressure from the political left, led by figures like Elizabeth Warren, urging rate cuts, which could influence the reported numbers.

Forecasts suggest adding 214,000 nonfarm payrolls to the US economy in March, a decrease from February's 275,000. However, predictions vary widely, with estimates ranging from 150,000 to 250,000. Additionally, there's speculation about potential revisions to previous months' data after notable downward revisions in February.

Goldman Sachs estimates a 215,000 increase in nonfarm payrolls, similar to the consensus, attributing this to an influx of foreign-born job seekers and factors like favorable weather conditions. There are conflicting reports on various labor market proxies, making it challenging to predict the outcome accurately.

Factors like illegal immigration and big data employment indicators suggest a potentially stronger report than expected, while employer surveys and concerns about inflation could lead to a weaker-than-expected outcome. The market is poised to react to the report, with certain thresholds indicating potential movements in stock prices.

Federal Reserve implications hinge on the data, with indications that a strong labor market wouldn't necessarily deter rate cuts, but unexpected inflationary pressures might. The market's reaction to the report could influence Fed decisions and impact equities and treasuries.

Overall, while todays report may not be groundbreaking, it holds significance for understanding the trajectory of the economy and potential Fed actions.