Tonight's non-farm payroll report is particularly important as it will be the first in three months not influenced by unusual factors. If there are surprises, will Powell still be "in no hurry to cut rates"?

On Friday, October 4th, at 20:30, the United States will release the September non-farm employment report. This is the first report following the Federal Reserve's decision to open the door to rate cuts by 50 basis points, and it is one of the two non-farm data points before the November meeting. As inflation subsides, the performance of the job market has once again become the Federal Reserve's primary concern.

Non-farm expectations: 140,000 people, 4.2%

According to a Reuters survey, it is expected that the non-farm payroll employment will increase by 140,000 in September, significantly lower than the average monthly increase of 202,000 over the past 12 months; the unemployment rate is expected to remain unchanged at 4.2%. It has been proven that in the face of Federal Reserve rate hikes, although the U.S. economy has been surprisingly resilient, avoiding the widely predicted recession, the job market has gradually lost momentum. From June to August, an average of only 116,000 new jobs were added per month, the lowest three-month average since mid-2020.

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However, predictions for Friday's non-farm data vary widely. Analysts at Citigroup estimate that the U.S. may have only created 70,000 new jobs in September, as their survey found that respondents reported increasing difficulty in finding work. "Survey data shows that workers are finding fewer and fewer jobs, and it is getting harder to find them, confirming that the labor market is softening, just as it usually does when entering a downturn," said Andrew Hollenhorst, the bank's U.S. economist. "As the Federal Reserve faces the rapid weakening of the labor market, we continue to expect it to adopt more aggressive easing policies."

Some forecasters believe the unemployment rate will rise to 4.3%, returning to the level of July. However, Nancy Vanden Houten, Chief U.S. Economist at Oxford Economics, wrote that if such an increase occurs, it is likely due to more people looking for work but not finding it, rather than more people being laid off.

The job market continues to slow down, but it has not "fallen off a cliff."

Before the release of the non-farm employment report, the United States has already announced several job market indicators this week. Job vacancies in August unexpectedly increased after two consecutive months of decline, but hiring remained weak; the Job Openings and Labor Turnover Survey (JOLTS) report showed a decrease in layoffs, with 1.13 job vacancies per unemployed person in August, compared to 1.08 in July; the resignation rate was at its lowest level in four years, indicating that Americans' confidence in the job market is weakening.However, the "small non-farm" data released on Wednesday performed beyond expectations, slightly alleviating people's concerns about the overcooling of the US labor market, while boosting expectations for the non-farm data on Friday night. "The ADP employment data continue to show the strong momentum of the labor market," said Michael Contopoulos, head of fixed income at Richard Bernstein Advisors, "The idea that employment is falling off a cliff is wrong, and the market is realizing this."

Ryan Sweet, chief US economist at Oxford Economics, said, "The layoff rate is still very low, but this could change rapidly, and I think this is what the Federal Reserve is worried about... I might describe the labor market as 'mediocre'. It is not creating enough jobs to keep up with the growth of the labor force." Sweet also said that there are many reasons for the slowdown in recruitment, including the compression of corporate profit margins, the uncertainty of the election, and the over-recruitment in industries such as healthcare, leisure, and hospitality. In addition, the effect of monetary policy has a lag, and interest rate cuts may take some time to start affecting the economy.

The Federal Reserve is not in a hurry to cut interest rates? The key lies in employment.

The non-farm employment report on Friday will push this week's focus on the US labor market to a climax, and employment has surpassed inflation to become the Federal Reserve's most concerned issue. Barclays analysts said that the September employment report may be particularly important because it will be the first time in three months that it has not been affected by weather events such as hurricanes.

The Federal Reserve cut interest rates by 50 basis points to the range of 4.75%-5.00% last month, which was the first interest rate cut since 2020, with the purpose of alleviating growing concerns about the health of the labor market. Federal Reserve Chairman Powell said in a speech in the early morning of October 1 that he does not want the job market to continue to cool down. Analysts expect that the Federal Reserve will cut interest rates again in November and December, but the magnitude is still uncertain. Powell said that if the economic performance meets expectations, there will be two more interest rate cuts of 25 basis points this year. However, he also pointed out that the labor market conditions have obviously cooled down in the past year, and pointed out that "workers now think that job opportunities are a bit less than in 2019."

Bloomberg strategist Tatiana Darie said that Powell's speech on Monday obviously poured a bucket of cold water on the market's aggressive pricing of the Federal Reserve's further interest rate cuts in the remaining time of this year, because he said that the Federal Reserve is not in a hurry to lower interest rates. The CME "Federal Reserve Watch" tool shows that the probability of the Federal Reserve cutting interest rates by 25 basis points in November is about 63%, and the probability of cutting interest rates by 50 basis points is about 37%. Traders bet that the Federal Reserve will reduce interest rates from the current level of about 5% to a level closer to neutral in the next 12 months, estimated to be about 2.9% in the end. This kind of aggressive easing policy is rare outside of economic recessions.

However, top economist David Rosenberg, who has always "sang衰" the performance of the US job market, said that the speed of the rise in the unemployment rate will be faster than the speed of the decline in job vacancies, which will mark a key turning point in the labor market, highlighting the necessity of a significant interest rate cut from now on. Rosenberg has been pointing out the weakness of the labor market for several months, and previously predicted that the unemployment rate may rise to more than 5% by the end of this year. He said that this is because employers who hoarded labor during the epidemic will eventually start to lay off workers, leading to net unemployment in the United States.

In addition, it is expected that several factors will affect the trajectory of the job market in the next few months. Although the recent interest rate cuts by the Federal Reserve are characterized as "re-calibration" rather than emergency measures, they are expected to help limit the economic headwinds in the next year. In addition, the unusually large government budget deficit helps to support the demand of the US economy. However, it should be noted that the impact of interest rates on the economy usually has a large lag, so the full impact of recent policy changes may not be immediately apparent.