NFP Data Has Sent Mixed Messages Across Key Assets

Latest NFP data has sent mixed messages to investors, resulting in significant movements across global financial markets, particularly affecting the US dollar, oil, and gold.

In July, the Non-Farm Payrolls report showed an increase of 114,000 jobs in the United States, significantly lower than the previous reading of 179,000 jobs and falling short of market expectations, which had projected 175,000 jobs.

Additionally, wage growth in the US declined last month. The average hourly earnings, on a year-on-year basis, registered at 3.6% in July, compared to the previous reading of 3.8%. This figure was below market expectations of 3.7%.

On a monthly basis, the average hourly earnings increased by 0.2%, contrasting with the previous reading of 0.3%.

These indicators shed light on the current labor market conditions, reflecting a deterioration. This supports the Federal Reserve’s position in favor of interest rate cuts at their September meeting, a positive move that could boost optimism in the markets.

However, the rise in the US unemployment rate has shifted the narrative. Investors are now concerned about the economy approaching a recession, as the unemployment rate increased to 4.3% from the previous 4.1%, aligning with market expectations.


The Federal Reserve’s response to these employment figures would likely be influenced by their dual mandate: maintaining stable prices and promoting maximum employment. Given the mixed signals from the data, here are a few potential scenarios:

Interest Rate Cut: The weak job growth and declining wage growth could prompt the Fed to consider further interest rate cuts. Lower rates stimulate borrowing and spending, potentially boosting economic activity.
Data Dependency: The Fed may closely monitor subsequent employment reports to assess whether the slowdown is temporary or indicative of a broader trend. If the labor market weakness persists, they might act more decisively.

Balancing Act: The Fed will weigh employment data alongside other economic indicators (such as inflation, GDP growth, and global conditions). They’ll aim for a balanced approach that supports growth without risking runaway inflation.

Communication: Fed officials will communicate their analysis and intentions through speeches, press conferences, and policy statements. Clarity and transparency are crucial to managing market expectations.
Ultimately, the Fed’s response will depend on the evolving economic landscape and their assessment of risks. Keep an eye on their statements and actions in the coming weeks.